Thursday, June 18, 2009

Sold My First Delinquent Lending Club Loan on FolioFn

On Friday, I announced that I was suspending my investments at Lending Club until either a delinquent loan caught up on payment; I accrued enough interest payments to offset my initial $25 investment or I was able to sell my investment at FolioFn.

Well, I was able to sell the $25 loan on Monday for $17. That's a 32% discount from the original loan investment. Initially, I listed the loan for sale at $19.09 and got no response. It didn't help that the FolioFn loan listing search feature wasn't working correctly on the weekend. My shift to a loan sale price of $17 was based on my gut feeling that I never should have made the loan, and FolioFn wasn't working well on the weekend. I initially figured FolioFn was a poor medium for searching for investment options and just wanted to unload my loan.

I initially thought FolioFn was a poor site because the option to sort notes by "yield to maturity" (YTM) was not working. Sorting loans by YTM is the best bottom line method of finding heavily discounted notes. How could people find my loan if this wasn't working well?

I tried the YTM sort feature today and it's working.

Another disturbing item is the fact that the equation used by Lending Club to calculate your Net Annualized Return does not factor in FolioFn fees and losses people may take selling discounted loans at FolioFn. About the only way the advertised "Net Annualized Return" works with any accuracy is if you hold all of your delinquent loans till default.

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