#1Lend2 on 10.01.07 at 12:02 pm
It is refreshing to see a lender achieving some success and feeling satisfied with his portfolio. However, in all fairness, those 7 late/defaulted loans equate to 2.5% of his portfolio. LendingStats averages out his weighted portfolio at B-, so that 2.5% is merely in-line with the Experian averages. That’s better than most of us are doing, but I’m not sure matching the expected failure rate is cause for true celebration!
#2Kevinon 10.01.07 at 8:05 pm
I am not saying that you are wrong, but the answer is more complicated than that…
for a 3 year amortized loan the default/late rates are lower near the end of the loan than in the beginning. I am not saying he is past the point of highest defaults. Just that so far he has held up fairly well.
I fully expect to make better than CD rate returns 8+%, just don’t ask me to prove it until 1/1/2010. Until that point I will take it on faith and continue to track the late curves: http://www.rateladder.com/2007/09/08/1-month-late-or-worse-curves-by-credit-grade-september-1-07-update/
#3Lend2 on 10.02.07 at 9:28 am
Fair enough. I did oversimplify the circumstances substantially. Of course, you also have to consider that his portfolio is only 140 days old. Since loans rarely recover from the >1 Month bucket, and he is likely to have more go late, it is likely that his annualized percentage of defaulting loans will run higher than that 2.5%. Again, it is impressive that he’s doing better than most of us. I’m just saying that his returns are pretty consistent with what I would expect based on the Experian default rates–he just happens to be invested in higher-rated loans than many of us.