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  #551  
Old 02-01-2013, 09:36 AM
wguy123 wguy123 is offline
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Quote:
Originally Posted by amarone View Post
If they were losses, why didn't you take a capital loss which should offset capital gains (if you had any), or income, if you had no capital gains. Both should lower your tax bill.
They were both losses of like 25 cents. If someone is late on a payment I immediately put in on for a slight loss to get rid of it.

Hopefully, foliofn provides the TXF by next year. I'm putting money in every month and will have quite a bit more sold through folio.

core_dump: Thought I could count cards but my wallet says otherwise
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  #552  
Old 02-01-2013, 01:35 PM
Mama Zappa Mama Zappa is offline
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I saw in TurboTax a link that says what to do if you can't import:
Quote:
Originally Posted by TurboTax
The IRS allows you to attach a statement showing each of your investment sales versus entering them individually in TurboTax (you'll either mail that statement with your return, or with Form 8453 if you file electronically). Your statement must include the description, date acquired, date sold, sales price, cost basis and gain or loss for each sale. In some uncommon cases, you may also need to include an adjustment code and adjustment amount. In addition, your statement must break down your investment sales into categories based on how the sale information was reported to you and to the IRS on Form 1099-B. You will enter only your totaled short-term and/or long-term gain/loss into TurboTax.

You have potentially six investment sale summary totals that need to be entered separately if you want to attach a statement:
- An entry showing short-term gain/loss totals for sales reported on Form 1099-B with cost basis reported to the IRS.
- An entry showing short-term gain/loss totals for sales reported on Form 1099-B where cost basis, whether provided to you or not, was not reported to the IRS.
- An entry showing short-term gain/loss totals for investment sales not reported on Form 1099-B.
- An entry showing long-term gain/loss totals for sales reported on Form 1099-B with cost basis reported to the IRS.
- An entry showing long-term gain/loss totals for sales reported on Form 1099-B where cost basis, whether provided to you or not, was not reported to the IRS.
- An entry showing long-term gain/loss totals for investment sales not reported on Form 1099-B.

The format of your statement must be similar to Form 8949.
That said, I *think* I've got the spreadsheet conversion working; there's manual tweaking to get columns in the right places, then you take the output of that, tweak slightly, and import. There's an issue with a checkbox on form 8949 (in TT, it says basis was reported); I don't know if I can override that, or if there's something I can put into the file header to say "turn it off". Right now my file looks like this (header,plus first transaction only):

V042
Amicrosoft Excel
D02/01/2013
^
TD
N323
C1
L1
PLending Club Note 883910
D09/13/2012
D11/27/2009
$5.18
$5.25
^
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  #553  
Old 02-01-2013, 02:33 PM
core_dump core_dump is offline
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Originally Posted by Mama Zappa View Post
Why wouldn't the basis just be the principal balance as of the date you sold it?

That is, assuming you were the original investor at Lending Club. If you *purchased* the note, I don't know what the 1099 would show.
Yes, that's precisely the problem. Since I live in one of those "bad" states, every note I acquire must be purchased on FolioFn. For a par value $24.00 note, it's common for me to buy it at say 21.84 and sell it for 23.76. That's obviously not a $0.24 loss like the 1099-B would imply. Conversely, I might buy something at 3% markup over par, hoping to sell it at 5%. Sometimes I cannot and have to sell it at just 1% markup. The 1099-B would imply a gain when I had an actual loss.

Then, as you said, if you toss in interim payments that really throws a monkey wrench into things. Now some of that is being reported on your 1099-OID and it's left to you to sort out the aftermath. If you even can.

It's not exactly rare for me to repurchase notes that I've already sold once, sell them again, and possibly even flip it a third time. This further complicates everything since I cannot simply match up note IDs.

Quote:
Originally Posted by Mama Zappa View Post
Have you resold any loans that you purchased on the platform? If so, what does the form show?
Like I said, all of mine fall under that category, and my 1099-B shows the two figures I noted in my previous post. Just the sales proceeds and par value just like yours no doubt does.

Quote:
Originally Posted by Mama Zappa View Post
What happens if you convert that 1099B to a spreadsheet, and start filling in your purchase prices?
My 1099-B is nearly 200 pages long so manual filling in or calculation of anything is out of the question. The year end trading summary might be of assistance in finding all the original purchase prices but I don't know which ones had interim payments, etc. Not to mention the multiple repurchase/resale issue I mentioned.

I _might_ be able to do it. Maybe. But I don't see how a person armed only with a spreadsheet created from imported 1099-B + OIDs would even have a chance.



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Originally Posted by wguy123 View Post
core_dump: Thought I could count cards but my wallet says otherwise
Heheh. Understood. When friends question me about staggering losses when I supposedly had an edge I just reply with "One word: Variance".

Quote:
Originally Posted by Mama Zappa View Post
That said, I *think* I've got the spreadsheet conversion working; there's manual tweaking to get columns in the right places, then you take the output of that, tweak slightly, and import. There's an issue with a checkbox on form 8949 (in TT, it says basis was reported); I don't know if I can override that, or if there's something I can put into the file header to say "turn it off".
Ho ho, good work! That looks like it should. As for the checkbox in the v42 file you linked to I saw there were some examples for no basis reported. Unfortunately they look virtually idential to me. Maybe an additional empty "$" line at the bottom of the entry for some of them (but not all!). I didn't have the time to read the file in detail but I didn't see an actual detailed description. It's as if the spec isn't completely described here.
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  #554  
Old 02-01-2013, 03:45 PM
Mama Zappa Mama Zappa is offline
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core_dump, given all that, I'd be sorely tempted to just report what they say on the 1099-B, and screw it. Arguably, that'd allow IRS to match up their numbers with what they've been told.... No, it's not "right", and you know you owe more than that.

Basically, you don't have (and CAN'T have, at your level of trading) all the details you need. You'd have to track every single thing that happens with one of these notes - purchase, repayments etc. like I was rambling on. And they do NOT make it easy to recreate that data. Yes, there's a monthly "report" from Folio detailing the sales (and I assume purchases; I haven't purchased there) and there's some kind of transaction ID on that, but that doesn't match up to anything on the Lending Club side.

And of course Lending Club doesn't offer any kind of transaction download - I suppose you could manually download the month-by-month transaction history, one painful query-ful at a time.

Then code yourself a nifty little system in Access, Oracle, or whatever to match and munch and crunch everything.

Oh wait - you have a job and a life, don't you!!

I dunno what you can do. It seems to me like an effort to be honest would send up some audit red flags: "LC/FFn says 300 bucks? Yet you're reporting 30,000 in income? Hmmmm, what *else* are you misrepresenting???".

For what it's worth, a link to my spreadsheet (with just one line filled in) is below. The situation with the basis-provided checkbox turned out to simply require a different set of reference codes on each transaction detail.

ttps://dl.dropbox.com/u/21250095/FolioFn%20spreadsheet.xls
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  #555  
Old 02-01-2013, 08:08 PM
core_dump core_dump is offline
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"Sorely tempted" is putting it mildly. The interesting part is that would probably survive an audit, too. I'm quite sure this will all be resolved legit-like by next year's reporting, and if not then, then TY 2014. Maybe it's best to takes what ye can gets until then.


Quote:
Originally Posted by Mama Zappa View Post
I dunno what you can do. It seems to me like an effort to be honest would send up some audit red flags: "LC/FFn says 300 bucks? Yet you're reporting 30,000 in income? Hmmmm, what *else* are you misrepresenting???".
This is certainly a valid point in general. Always best to match their own numbers even if they're wrong. With schedule C income at a decent level I've already got a huge target on my back.

However in this case because the IRS isn't getting basis information, they're not actually seeing the $200 loss. All they see is $146k in sales proceeds. They don't know if that was $146k profit or a 2 million loss. It's up to you to supply the appropriate basis. For what it's worth, this was the way _all_ stock sales were reported up until 2011. (Don't quote me on the year.) Loss or profit, they don't know, it's all dependent upon that basis column which is 100% honor system. Err it _was_ I mean.

Which can get you in a pickle. I did some day trading in 2001 and like an idiot didn't track my basis. I didn't file, either. 7 years later the IRS filed a substitute for return and they had no choice but to assume that I made 100% pure profit on all those sales since they had no basis information. I received a hefty tax bill. Staggering. By this time half of those stocks didn't exist, and no records were easily available.

A CPA told me: "If you can't figure out your basis, then neither can the IRS. Keep that in mind when filing."


Quote:
Originally Posted by Mama Zappa View Post
For what it's worth, a link to my spreadsheet (with just one line filled in) is below. The situation with the basis-provided checkbox turned out to simply require a different set of reference codes on each transaction detail.
Yeah that's exactly what I was looking for, a reference code. But I didn't see one in the examples. Is that the "N323" in your snippet? I'm on my laptop and can't call up spreadsheets at the moment, otherwise I'd just open it and see what the score is.
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  #556  
Old 02-02-2013, 06:12 PM
Mama Zappa Mama Zappa is offline
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Quote:
Originally Posted by core_dump View Post
....

However in this case because the IRS isn't getting basis information, they're not actually seeing the $200 loss. All they see is $146k in sales proceeds. They don't know if that was $146k profit or a 2 million loss. ....
Which can get you in a pickle. I did some day trading in 2001 and like an idiot didn't track my basis. I didn't file, either. 7 years later the IRS filed a substitute for return and they had no choice but to assume that I made 100% pure profit on all those sales since they had no basis information. I received a hefty tax bill. Staggering. By this time half of those stocks didn't exist, and no records were easily available.....
Ouch on the tax bill . I guess you didn't have any statements from the brokerages or anything at all. Were you able to challenge any of the tax that year?

In your case, while (because of your purchase/sales history) your own basis is a lot more complicated, don't you think they'd generally assume the principal at sale is the basis? At least in my case I can produce FFn statements showing I haven't made purchases.

Personally I'd suggest you discuss this situation with a tax specialist to see if they have any advice.

If you're using Quicken or some such, start recording **every** transaction, every purchase / sale. And every repayment / interest payment as well. That *should* give you all the details you need for next year. That may not be workable if you continue trading at that level this year, but you could at least give it a try to get your January transactions entered and see what a pain it might turn out to be. Entering the sales (and repayments) would be a pain in that you'd have to select specific lots when you record the sale transaction.

I'm going to see if I can get a family member (who is a CPA and does taxes) to take a look at this thread and make any suggestions he can.

Oh yeah - reference code (also abbreviated at least one place I saw) as "refnum". That is indeed the N323 etc. I stumbled across a site (mentioned in the spreadsheet) that listed the codes to use for the A / B / C categories (reported / no basis, reported / basis provided, not reported). Presumably other codes would be used for things like medical expenses, taxes paid, etc. I took the N323/N321 codes from the Quicken TXF export but of course I found those didn't import correctly because of the basis reporting.

Last edited by Mama Zappa; 02-02-2013 at 06:15 PM..
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  #557  
Old 02-02-2013, 10:15 PM
core_dump core_dump is offline
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Originally Posted by Mama Zappa View Post
Ouch on the tax bill . I guess you didn't have any statements from the brokerages or anything at all. Were you able to challenge any of the tax that year?
One brokerage I wasn't even able to remember the name of. The other one said it would be "highly unlikely" to even be on microfilm because they are destroyed after 7 years. Brokerages aren't too helpful when you haven't even been a customer in years.

And no, I didn't challenge the tax. I also had hefty schedule C income and by this time no documents for expenses, and no way to even estimate them. After tossing around some of my own numbers and adding up penalties I decided I liked the IRS's numbers just as much as my own and didn't want to stir up a hornet's nest. I set up a payment plan to prevent them from seizing assets but am in truth just running out the statute of limitations on it.

Obviously the IRS and I are not pals.

Quote:
Originally Posted by Mama Zappa View Post
In your case, while (because of your purchase/sales history) your own basis is a lot more complicated, don't you think they'd generally assume the principal at sale is the basis?
If "they" means the IRS, sure, absolutely I think they would. Only thing is the IRS doesn't get that info here. It was just provided as a convenience to us and since the basis checkbox is empty, their electronically filed info doesn't show any of that principal column that we see. Or if the "they" is an actual IRS auditor, a person, yeah I think that would certainly fly fine as long as LC wasn't the subject of the audit in the first place. If they want to subpoena records from LC and then dig through thousands of records trying to find a buck on each trade, so be it. I don't see why they would though -- the 1099-B looks pretty black&white unless you've been there... some random auditor likely has not been.

Quote:
Originally Posted by Mama Zappa View Post
Personally I'd suggest you discuss this situation with a tax specialist to see if they have any advice.
A tax specialist is very likely to give me an answer I do not like. The only relevant question to me is do I have a case, however weak, for using the numbers displayed on the 1099-B as-is? I say yes. Certainly if I had not made a public post about it beforehand, I would easily have a case. That answer means this is not a criminal matter if I make the "wrong" choice. I've already paid my estimated taxes for the year including LC income -- anything "refunded" is going to be seized for back taxes so the IRS gets the money either way.

Worst case 3 years from now when this all gets sorted out in an audit I'll end up owing penalties and interest on a few k. If/when that happens I'll gladly pay it. It will still be less cash than I'd have to pay someone to sit there and calculate all this. (Good thing you don't have to pay for the auditor's hours! Not directly anyway)

Quote:
Originally Posted by Mama Zappa View Post
If you're using Quicken or some such, start recording **every** transaction, every purchase / sale. And every repayment / interest payment as well. That *should* give you all the details you need for next year. That may not be workable if you continue trading at that level this year
That is definitely not workable, considering I have liquidated my entire portfolio and have gone to 100% trading. Last year will look like peanuts compared to this one. We are talking hundreds of notes per day that get bought and sold. It's pretty wild and already takes several hours out of the day. If any of my notes happens to receive a payment, I sure do not know about it ever. That probably appears on some report on the LendingClub-proper site though... I rarely visit that side of things.

An easier solution would be to write down your account value at the start of the year. Then at the end of the year take the difference. Subtract out your OID and that which remains must be your capital gains. Ohhh, but wait, then your numbers wouldn't match the sales proceeds reported to the IRS. You could make up a basis number which corresponds to your calculated gains but that would be a complete fabrication, even though it came out to be the right number. Damned either way.

No, this year I'm going to do what the Average Joe would do. Next year is a different matter and I have a feeling things will be different then. Certainly by then my software will have better data.
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  #558  
Old 02-03-2013, 06:12 PM
Mama Zappa Mama Zappa is offline
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Originally Posted by core_dump View Post
....
If "they" means the IRS, sure, absolutely I think they would. Only thing is the IRS doesn't get that info here. ....If they want to subpoena records from LC and then dig through thousands of records trying to find a buck on each trade, so be it. I don't see why they would though -- the 1099-B looks pretty black&white unless you've been there... some random auditor likely has not been.
....The only relevant question to me is do I have a case, however weak, for using the numbers displayed on the 1099-B as-is? I say yes...........If any of my notes happens to receive a payment, I sure do not know about it ever. That probably appears on some report on the LendingClub-proper site though... I rarely visit that side of things.

An easier solution would be to write down your account value at the start of the year. Then at the end of the year take the difference. Subtract out your OID and that which remains must be your capital gains. ....
Yes, "they" referred to the IRS. I can't speculate about how much trouble they'd go to to try to document a dollar here or there, I'm more worried that they'd decide to go with "hah - it's ALL PROFIT" which would be pretty awful.

LC does indeed have reports that show interest paid, though it's not easy. I looked at a recent statement and it lists all my loans (presumably except for ones I sold that month) and how much principal and interest each got. This is not in any format you could easily import into any software. Nor does it say on what date the payment was received (which is kind of essential in tracking gains / losses). There is a separate account activity query, that you can display all transactions for a period of up to one month.

Ideally, both Lending Club and FolioFn would have downloadable transactions files. FolioFn has nothing of the sort; Lending Club lets you download your portfolio (current values only, no transaction history).

Out of curiosity, when you've bought / sold the same loan twice, do you see separate *note* identifiers? I think that is how you could track which transactions are tied to which occurrences. I know that when I am selling a loan, I can find the same loan in the "for sale" list with different note IDs (for different sellers). Obviously this doesn't help you if you're trying to manually match things, but somewhere down the line it might help with automating things.
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  #559  
Old 02-03-2013, 07:01 PM
core_dump core_dump is offline
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Originally Posted by Mama Zappa View Post
Out of curiosity, when you've bought / sold the same loan twice, do you see separate *note* identifiers? I think that is how you could track which transactions are tied to which occurrences. I know that when I am selling a loan, I can find the same loan in the "for sale" list with different note IDs (for different sellers). Obviously this doesn't help you if you're trying to manually match things, but somewhere down the line it might help with automating things.
I meant actually buying/selling the same *note* twice, not loan. For that little slice of the whole loan, the note ID never changes regardless of how many times it's been sold. However there is another identifier, ordernum (or orderid) which does in fact change each time the note changes hands. That ID isn't displayed anywhere but it's in all the FolioFn URLS. I do not think anything on LendingClub would reference a FolioFn ordernum.

Dates would be absolutely essential for having any chance of matching things up. You said they didn't display dates on that payment report; big ouch there.

If might seem like a simple matter to have my software crawl through and take snapshots of princ/interest/etc of each note but this information is often incorrect at certain times of the day. One funny thing that happens is the note detail page, the FolioFn search listings, and the 'my notes for sale' will all show 3 different values! So long story short even with some automation going, often times I don't even know what's really going on with the notes.
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  #560  
Old 02-04-2013, 06:06 AM
core_dump core_dump is offline
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Thought I should probably toss this in, which I forgot to mention:

Quote:
Originally Posted by Mama Zappa View Post
Yes, "they" referred to the IRS. I can't speculate about how much trouble they'd go to to try to document a dollar here or there, I'm more worried that they'd decide to go with "hah - it's ALL PROFIT" which would be pretty awful.
And that is _exactly_ what would happen if one didn't file a proper return including a schedule D. I can certainly see the possibility that an LC investor who sells a few notes for a loss on Folio would at the end of the year just decide to ignore it. "Hey, it was a loss, why bother with it?" (wguy123, I think this applies to you.)

No schedule D means they will assume that 100% of your sales proceeds are profit; they don't have any alternative. And they will send you a bill, most likely. That's going to be a nontrivial amount, even if you only sold a few notes. It would certainly be way more than any interest you would have received that year on those. You could just pay it (bah!) or file an amended return, but if you have to pay someone to do that for you you've wiped out any of your profits either way.

Needing a schedule D means no 1040EZ nor 1040A for you. For someone that's accustomed to walking into the grocery store around tax time and getting theirs done for free I can see this being an unpleasant surprise. All from selling one little note!
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  #561  
Old 02-04-2013, 05:55 PM
wguy123 wguy123 is offline
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I did include those two little sales for losses so they are documented in the schedule D. I did my taxes every which way. I got married last year and I am now experiencing the marriage penalty: Two wage earners that make decent'ish money. I haven't had to take the standard deduction for ever and now my mortgage insurance, donations, property tax, sales tax, energy efficiency changes on house, etc all adds up to barely less than the standard deduction. I did my taxes for my wife and myself for 2011 (while we were single) and it is quite a difference between two single earners and our 2012 merged taxes. We did make more in 2012 but not that much more. Oh well, we are doing our part as good Americans.

Sorry for the side-tracked conversation. To bring it back, just transferred my February allocation to LC.
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  #562  
Old 02-05-2013, 01:13 PM
Mama Zappa Mama Zappa is offline
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I just stumbled across something called a wash sale exclusion, which is when you sell something at a loss, then repurchase the same (or almost identical) stock within something like 30 days. It's intended to keep people from selling something to lock in a loss then immediately repurchasing the same stock.

The idea is, if you buy stock for 1000 dollars and sell for 800, you have a capital loss of 200 dollars. Then you buy that stock right back for 800 dollars. You still own it, but you record a capital loss.

With the wash-sale rule, you can't claim that loss. Instead, the loss is added to the basis of the new stock. So if you resold that stock later for 1100 dollars, your basis is not the 800 you paid for it, but 1,000 (the purchase price plus that wash-sale loss). So your gain in that scenario isn't 300, but 100.

How this applies to something like Lending Club, where you're purchasing different loans, I don't know. For example when I sold loan 000001 for a dollar loss, then a few days later invest in a new note, do I consider that to be a wash-sale scenario? I'm going to say no, since it really is a different *loan*. Core_dump, one might argue that you *do* need to worry about that since you've repurchased the same loan.
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  #563  
Old 02-05-2013, 01:44 PM
core_dump core_dump is offline
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Yeah the wash sale rule can be a thorn in one's side when trading stocks at least. From memory I believe the wording is "substantially the same" security. Brokers track this for you but the thing is in practice it's only applied to _exactly_ the same security. So I could trade SPX (floor traded S&P 500) and then turn around and trade SPXPM (the electronically traded version of the exact same thing) and get around it.

For LendingClub I'd say that definitely does not apply in most cases because they're not even close to being substantially the same risk. Maybe if two of your notes happen to belong to the same loan. Wash sale is always detrimental to the investor, never beneficial, so unless your statements say wash sale I wouldn't even go there.

If you're treating trading as a business the wash sale rule does not apply to you. You can also use mark-to-market accounting. (This would be closer to what I was getting at with taking your starting/ending account values for the year.) But then you have to pay social security on top of your tax rate instead of just the capital gains rate... no thankee.
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  #564  
Old 02-05-2013, 05:31 PM
core_dump core_dump is offline
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How's this for the ultimate wash sale: When the sale and repurchase happens in the very same trade!

You need two LendingClub accounts, a regular taxable one and a Roth IRA. Say you have a fresh $25 note in your taxable account. Late at night (don't try this at home kids, it'll get snatched if you don't take precautions) you post that note for sale for $0.01 and immediately buy it using your Roth account. Do this hundreds of times.

In your taxable account you just took a hefty loss and get to deduct that. Your Roth just had a massive gain, unrealized, but it doesn't matter because it will never ever be taxed. Since you can withdraw your own contributions from a Roth without penalty you can suck the money out, redeposit into your taxable account, and start the whole cycle over just one time if you're short on cash. You don't even lose any to FolioFn fees because 1% of $0.01 is zero.

Effectively you now have a Roth IRA for which contributions are deductible (huge plus! unheard of) and now you have a way to bypass the contribution limits and fund your IRA to unlimited* levels. All tax free. Not even any taxes on the back side since it's a Roth. This is such a goldmine it should be a crime.**

There might be a flaw in my logic somewhere, but it seems like a great deal to me. It's on my todo list for this year.

* Limited only by your capital gains + 3k, and arguably with carryover it really is unlimited.
** It probably is, technically.

Last edited by core_dump; 02-05-2013 at 05:32 PM..
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  #565  
Old 02-05-2013, 06:04 PM
Mama Zappa Mama Zappa is offline
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Hah!! Sneaky (and yes, it probably is illegal). Also, won't work. Someone else might snag that ultracheap note - that's how I lost 10 bucks on a sale (posted something for 16 bucks vs 26 - saw it just as I clicked "OK", and by the time I could try to change the price, someone else had snagged it. I mean, quite literally within 3 seconds.

For what it's worth, I*think* the limitation on withdrawing Roth money is that it has to be there for x years. Say you put 2,000 in the account in 2006 and every year thereafter. Then in 2011. you can withdraw that 2,000 (but not its income, unless of course you're over 59 years old). So unless you put a whole lot of money in a Roth 5+ years ago, there's a built-in limit.

BTW - I popped in to tell the gang that if anyone is using my spreadsheet for creating their TXF file, I had the codes reversed. 711 is short term, 713 is long term. I've updated that shared copy (I think....). I noticed this when I was reviewing my return, and realized that I was showing a short-term *gain* when I was pretty sure the opposite was true.

Easy enough to fix; I just killed the imported data (which is easier to do than it used to be), fixed my file, and reimported.

Last edited by Mama Zappa; 02-05-2013 at 06:08 PM..
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  #566  
Old 02-05-2013, 06:54 PM
amarone amarone is online now
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Originally Posted by Mama Zappa View Post
For what it's worth, I*think* the limitation on withdrawing Roth money is that it has to be there for x years. Say you put 2,000 in the account in 2006 and every year thereafter. Then in 2011. you can withdraw that 2,000 (but not its income, unless of course you're over 59 years old). So unless you put a whole lot of money in a Roth 5+ years ago, there's a built-in limit.
That time limit applies to earnings. You can withdraw your contributions at any time (there are people who suggest using a Roth IRA as your emergency fund). Of course, the "scam" being discussed would result in contributions worth virtually nothing, so there would be minimal contributions that you could withdraw.
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  #567  
Old 02-05-2013, 07:29 PM
Mama Zappa Mama Zappa is offline
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Crud. Just found this in my inbox:
Quote:
Originally Posted by LendingClub
Important information about your 2012 IRS Forms 1099-OID, 1099-INT, and 1099-B

Dear (mama zappa):

Lending Club will be issuing corrected 2012 IRS Forms 1099-OID and 1099-INT in addition to providing a new IRS Form 1099-B for recoveries of principal amounts from previously charged-off loans by February 19, 2013. Please use the corrected Form 1099s for your tax filing purposes.
I had quite literally JUST FINISHED REVIEWING our taxes and we're ready to submit.

Now, in my case, the 2012 recoveries were less than two dollars and I *think* they were reflected in the OID (at least, the sum of that was a dollar or so more than the interest on my 12/31 statement). Still, it's annoying as hell.

On an unrelated note: I was crunching my son's tax numbers (no real income, just some stock sales from the account we had set up for his tuition).... and one of the 1099s won't be available until 2/15.

Whatever happened to "must be ready by 1/31"?????
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  #568  
Old 02-06-2013, 05:22 AM
amarone amarone is online now
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Quote:
Originally Posted by Mama Zappa View Post
On an unrelated note: I was crunching my son's tax numbers (no real income, just some stock sales from the account we had set up for his tuition).... and one of the 1099s won't be available until 2/15.

Whatever happened to "must be ready by 1/31"?????
The deadline for 1099-B is to be mailed by Feb 15.
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  #569  
Old 02-08-2013, 04:45 PM
core_dump core_dump is offline
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Here's the latest issue of core_dump's Sneaky Schemes, delivered right to your mailbox but no longer on Saturday. Today we will keep it 100% legal.

Take out a LendingClub loan as a borrower. Intentionally do not pay the bill on time and let it go into grace status. These notes easily sell for 20% discount or more. Buy all of them that get posted for sale, after all, you know that you're going to pay it. The 14th day before it goes into late status, make the payment to bring it current. Now sell the notes for a healthy profit. If you can't find buyers at a good price pay the loan in full. Repeat each month.

This is like betting on the horse after you already know who won. 20% return each month isn't bad. Actually since you didn't put up any of your own cash it's all profit, not even a rate of return.

That idea alone is worth what you paid for it, but to make sure you get your money's worth here's a bonus:

For even larger profit you need to manipulate your FICO score. This is only easily done if you have low total credit card limits, say <$5k in all. Max out all of your cards temporarily, heck even buy a case of dollar coins from the mint if you have to. A note in grace status with a huge credit score drop sells for _much_ cheaper, obviously.

Other ways to really drop the price:
- Start an LLC which subscribes to TransUnion/etc and report a bad debt on your own file. You can easily delete it as an error later. I don't know what these subscriptions cost. Actually sign loan papers to keep it legal.
- Call them up and give them bankruptcy counsel info, without filing BK of course. 90% discount right there when it shows in the collection notes. Then pay in full. This would likely only work once.

To keep opening loans without hitting your credit report with inquiries you can take out the second one while the first is still open. The hit might come in as an account review which doesn't count. Even if not, as long as you don't need credit in 12 months, who cares? Lower credit score == bigger profit.

I think that covers it. Stay tuned for next week when we will sell church insurance to little old ladies.
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  #570  
Old 02-19-2013, 12:01 PM
Mama Zappa Mama Zappa is offline
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Just got my updated 1099-OID and 1099-B (for the two recoveries).

Yep, they moved 23 cents from one loan, and 93 cents from another, from interest to long term gain.

Yes, you got it right: a dollar and sixteen cents will now be treated as long-term gain rather than interest, and therefore taxed at the lower long-term gain rate. 15% versus 25% (or whatever my marginal rate is). I'm saving 10 whole percent. Yah - 11.3 cents.

I'll try not to spend it all in one place.

A question: For folks who have received a 1099-OID: are you reporting every line separately or just as an aggregate? It occurred to me that maybe I oughta do the details, when I'd originally done it as an aggregate. Of course reporting the details means finding the damn code to make the TXF file parse correctly.....
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  #571  
Old 02-22-2013, 01:56 AM
core_dump core_dump is offline
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I spoke with someone at LendingClub today who said they may be going public in the near future. If the IPO does in fact happen, he says regular investing will then be open to people in all states. What one has to do with the other is beyond me, but I found that interesting.


Quote:
Originally Posted by Mama Zappa View Post
A question: For folks who have received a 1099-OID: are you reporting every line separately or just as an aggregate?
The regular interest? As far as I know you only need to file a schedule B and separate all that out if you received more than $1500 for the year (which also includes dividends). Which I guess isn't exactly a hard limit to hit on LC once you've got a modest amount invested. But even then you only have to separate out the payers, which would still be just a single entry if you don't have any other interest bearing accounts or dividend paying stocks.

Or were you talking about something else entirely?

I came in under the threshhold this year but I don't think I would have even thought to check on my total amounts if you wouldn't have said something. Thanks.

Last edited by core_dump; 02-22-2013 at 01:57 AM..
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  #572  
Old 02-22-2013, 01:57 AM
core_dump core_dump is offline
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I spoke with someone at LendingClub today who said they may be going public in the near future. If the IPO does in fact happen, he says regular investing will then be open to people in all states. What one has to do with the other is beyond me, but I found that interesting.


Quote:
Originally Posted by Mama Zappa View Post
A question: For folks who have received a 1099-OID: are you reporting every line separately or just as an aggregate?
The regular interest? As far as I know you only need to file a schedule B and separate all that out if you received more than $1500 for the year (which also includes dividends). Which I guess isn't exactly a hard limit to hit on LC once you've got a modest amount invested. But even then you only have to separate out the payers, which would still be just a single entry if you don't have any other interest bearing accounts or dividend paying stocks.

Or were you talking about something else entirely?

I came in under the threshold this year but I don't think I would have even thought to check on my total amounts if you wouldn't have said something. Thanks.
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  #573  
Old 03-29-2013, 02:50 PM
Mama Zappa Mama Zappa is offline
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Anyone have any interesting updates?

Nothing much here. I finally unloaded a loan that had started going bad in late December; wound up discounting it about 80% or so to get rid of it. At least I won't have to deal with the accounting impact of recoveries.

I spotted another one, last night; using the '4 business days' rule, it should have completed its payment but had not. And the FICO had been dropping, 30-40 points just this month. I was able to unload it overnight for a few pennies more than current principal; with the fee it'll be a net loss for the month but a net profit overall; I'll net roughly the principal minus the current month interest, so I'm still ahead of the game.

Also unloaded my two E-class loans. They'd both been doing well, and in fact both loans' FICOs had risen several slots, but they made me nervous anyway (mainly because of the general default rate, nothing about those loans in particular). Surprisingly, it took a while to sell them both despite the long-term good prospects.

I had a D-class loan that was also making me twitchy; it was current but the scores were inching down; I sold it for a very small profit.

Other than that, just buying-and-holding for the most part. I have 75 current loans plus a handful more in funding. Net annualized return per LC is a bit over 10% but of course that doesn't account for the loans sold at a loss. That one bad loan last month wiped out my interest for the entire month plus a bit more.

I'm going to try to be more proactive about watching things and listing them for sale; right now I tend to forget about it for a few days. With the end result that (as in December) I miss something until it's very definitely and visibly going south, or I have cash piling up in the account, uninvested.
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  #574  
Old 03-29-2013, 03:48 PM
core_dump core_dump is offline
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Here's one update you may find interesting:

A few days ago I came across a note that was heavily discounted to the point it must have been a mistake on the seller's part. (Sound familiar?) It was either a typo or mental illness. I bought it. The next day morning the trade was busted with the usual cancelled message even though the payment date wasn't anywhere near.

Obviously the person called in to complain and LC/Folio gave it back to them. It would seem LendingClub enforces its own rules selectively, based on how loudly you whine or how much you have invested (this was a $larger note). Something about that doesn't sit well with me. They told you it wasn't possible to cancel things, but obviously it is. Just depends on who you are I guess.
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  #575  
Old 03-29-2013, 04:19 PM
Onomatopoeia Onomatopoeia is online now
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Nothing too interesting on my end. No defaults lately, so that's good.

On average, I buy 3 notes a week, and my current Net Annualized Return rate is 7.87%, so that's pretty steady too.

I find it somewhat amusing, not to mention frustrating, that I've been a member of LC since October of 2010 and have already had 32 loans fully paid. 32!

Last edited by Onomatopoeia; 03-29-2013 at 04:22 PM..
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  #576  
Old 03-30-2013, 08:50 AM
amarone amarone is online now
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It is almost exactly two years since I started with Lending Club. I invested $1,000 in March 2011 and a further $5,000 in March 2012. I use a passive approach - I do not monitor for non-performing loans. I invest and reinvest according to a saved filter - I do not research individual loans; if it gets through my filter, it is in.

Lending Club is reporting a 9.70% annualized return (Quicken says 11.65%) and I have $6,648. I have had 371 notes, of which:
  • 315 are current
  • 40 are fully paid
  • 1 is 16 - 30 days late
  • 4 are 31 - 120 days late
  • 11 are charged off
I am now getting about one default per month. I get about $69/month interest, and lose about $21 on average to a defaulting loan.
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  #577  
Old 04-06-2013, 12:05 PM
Onomatopoeia Onomatopoeia is online now
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I spoke too soon. I now have a loan 1 - 15 days past due. I just put it on the market for a 10% discount. I don't know if that's enough. I guess I'll see in a few days.
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  #578  
Old 04-09-2013, 07:40 PM
gregorit gregorit is offline
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Newbie

I'm new to LC but trying to get up to speed quickly. Background - living in PA, have to trade on secondary market. (FolioFn). Have a few $K in notes already, but still trying to separate the wheat from the chaff.

I have some questions that I hope folks can provide some quick insights on:

1) Why are there so many bad loans approved by LC? Example: Loan consolidation when the LC rate is sometimes WORSE than some of the cc debt being consolidated. Loans where somebody was at 85%+ of their max revolving credit. Large 3 or 5 year loans (20K+) when the person only made $50-60K / year.

2) Are the loans on FolioFN the dregs of what's available on the primary market? Seems like a lot of the loans look like primary lenders trying to 'dump' problems.

3) If I can 'hypothetically' identify the original lender, is it illegal to contact the deadbeats? (I'm talking about illegal from from a legal perspective, not a LC POV.)

Thx!
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  #579  
Old 04-10-2013, 09:03 AM
core_dump core_dump is offline
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Quote:
Originally Posted by gregorit View Post
1) Why are there so many bad loans approved by LC? Example: Loan consolidation when the LC rate is sometimes WORSE than some of the cc debt being consolidated.
LC doesn't know what the borrower's original rate was. That info comes out in the Q&A after the fact. As for why a borrower would accept that, could be any number of things. They don't have to deal with the CC companies anymore. Their util will instantly drop to 0% and maybe they need to boost their score for some reason. Or maybe they're just fooling themselves into thinking they actually did something about their debt. I love seeing all these loan descriptions when they say "debt free". Moving debt from one place to another is hardly being debt free.

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Originally Posted by gregorit View Post
Loans where somebody was at 85%+ of their max revolving credit. Large 3 or 5 year loans (20K+) when the person only made $50-60K / year.
Those wouldn't be dealbreakers in my book. The only difference between an 85% util and a 15% util is another credit card application, perhaps. If LC filtered out all loans that somebody, somewhere _might_ have a problem with then there wouldn't be a whole lot available

Quote:
Originally Posted by gregorit View Post
2) Are the loans on FolioFN the dregs of what's available on the primary market? Seems like a lot of the loans look like primary lenders trying to 'dump' problems.
Yes and no. You're only seeing the ones that haven't been sold, so of course these could be described as the "dregs" I guess. If you checked for new notes several times a day you'd stand a better chance at picking ones up with no problems. Good ones disappear quickly.

On the other hand, some buy-and-hold investors need a reason to screw around with the trading platform so those folks may only sell problem notes. Or when they get sick of LC (or need the money out) they dump their entire portfolio at once. But there is always a good supply of problem-free notes if that's what you want.

Even if I didn't live in a trading-only state I think I'd still buy all my notes on the trading platform. Which would I rather spend money on: A brand new note with no payment history and have to pay full price for it? Or one with a 6+ month perfect payment history, and maybe even get it at a small discount? Just takes patience.

Quote:
Originally Posted by gregorit View Post
3) If I can 'hypothetically' identify the original lender, is it illegal to contact the deadbeats? (I'm talking about illegal from from a legal perspective, not a LC POV.)
Awww, please tell me you wouldn't actually call someone and harass them over 25 bucks. Legality would depend on what you said, I would think. You don't actually own the debt so they don't owe _you_ anything. If you didn't run afoul of the FDCPA maybe you could get by. You'be acting as a collection agent for LC without pay. If this is fun to you seems like it would be more profitable to buy some accounts from a debt broker and do it for a living.
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  #580  
Old 04-10-2013, 09:16 AM
Mama Zappa Mama Zappa is offline
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Quote:
Originally Posted by core_dump View Post
LC doesn't know what the borrower's original rate was. That info comes out in the Q&A after the fact. As for why a borrower would accept that, could be any number of things. They don't have to deal with the CC companies anymore. Their util will instantly drop to 0% and maybe they need to boost their score for some reason. Or maybe they're just fooling themselves into thinking they actually did something about their debt. I love seeing all these loan descriptions when they say "debt free". Moving debt from one place to another is hardly being debt free.....
I remember posting upthread about one loan I saw, where the would-be borrower would wind up paying more - both in terms of absolute interest rate, and monthly payment, than if they stuck with their current loans.

I took that as a huge red flag, Either they were genuinely that stupid, or they planned to stiff Lending Club lenders, or something.

Re debt free: well, if you go with the assumption that the plan is to pay down the LC loan in the 3 (or 5) years, which might be faster than their current scenario, then I can't quibble that much.

I'm one of those buy-and-hold investors who doesn't sell loans easily. So yeah, something I'm selling stands a fair chance of being a risky loan. I sold one the other day at a discount (not much of one, just a few cents under the current principal + interest) because it had gone into its grace period. As it happens, the payment processed a day or so after the sale so the buyer got the payment, which is cool.

I also noted a loan going bad the other day (payment due on the 2nd, which should have completed the 8th). I listed it at a small discount even before it went to "grace period" status but it hasn't sold yet. I'll mark it down a penny or so every few hours until it sells or gets a payment.
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  #581  
Old 04-10-2013, 10:28 AM
core_dump core_dump is offline
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Originally Posted by Mama Zappa View Post
I took that as a huge red flag, Either they were genuinely that stupid, or they planned to stiff Lending Club lenders, or something.
Stiffing the lenders is certainly a possibility. They sure seem to make it easy. I don't think they spend much effort on collections; it's not like they have much motivation to do so.

But I can see myself doing something "stupid" like that if I had high util and was in any of the following circumstances:

- Needing to quickly get above a minumum credit score for employment or security clearance, etc.
- Right before I bought a house or refinanced. Paying a few bucks more in interest on $10k of credit card debt is nothing compared to the money I'd save on a $500k mortgage over the life of a 30 year loan with a much better credit score after showing 0% utilization.

Or any other situation where I needed a higher credit score and fast (<30 days) and didn't have the money to pay off the cards. If I wanted the balance back on the cards afterwards I could just do a balance transfer.

And then there are people who are just generally in trouble and this is the only way to rack up more debt. Nobody will give them more credit cards but they can "consolidate" and run the balances up again. It's the only way. No more stupid than going into CC debt in the first place.

Last edited by core_dump; 04-10-2013 at 10:29 AM.. Reason: Meant "stiffing", not "stiffy". Freudian slip.
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  #582  
Old 04-11-2013, 09:52 AM
gregorit gregorit is offline
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Thanks for the quick responses to my questions, very illuminating.

Given LC's stated desire to cater towards more institutional investors, what impact do you think that will have over the next year or so as they ramp up for an IPO? My concern is, again, things getting stacked against retail folks. (My thinking is that the loan quality available to retail will go DOWN.)

Also - I'm not sure I'd have the time and patience to manage hundreds of notes - is there some way for FolioFn traders to take advantage of the "Portfolio" feature availble to those doing direct investments with the notes? (It shows as option from the home page if you're NOT logged in, under "Build a portfolio")

I must admit to still being a bit puzzled by some of the notes being sold on Folio. I don't even see why a negative YTM sale should be allowed, nor why someone would be trying to dump a note with ONE payment left. Seeking the additional liquidity associated with $1.37 just seems pointless when the pay-off is right around the corner.
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  #583  
Old 04-11-2013, 10:32 AM
Mama Zappa Mama Zappa is offline
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Quote:
Originally Posted by gregorit View Post
Thanks for the quick responses to my questions, very illuminating.

Given LC's stated desire to cater towards more institutional investors, what impact do you think that will have over the next year or so as they ramp up for an IPO? My concern is, again, things getting stacked against retail folks. (My thinking is that the loan quality available to retail will go DOWN.)

Also - I'm not sure I'd have the time and patience to manage hundreds of notes - is there some way for FolioFn traders to take advantage of the "Portfolio" feature availble to those doing direct investments with the notes? (It shows as option from the home page if you're NOT logged in, under "Build a portfolio")

I must admit to still being a bit puzzled by some of the notes being sold on Folio. I don't even see why a negative YTM sale should be allowed, nor why someone would be trying to dump a note with ONE payment left. Seeking the additional liquidity associated with $1.37 just seems pointless when the pay-off is right around the corner.
It's obvious to me that at least in some cases, they are allowing automated tools to scan and purchase loans. For example the time I accidentally put a 1 instead of a 2 in front of the price, and the loan was snatched up in the split second before I tried to reprice it. They don't advertise this obviously.

One thing that's frustrating to me on the resale front: you have no visibility into what loans have already sold. As in, what kinds of parameters are loan purchasers looking for. Both buyers AND sellers could make more educated decisions if that were visible.

As far as selling a loan with a negative yield projection: that puzzles the hell out of me as well. Late last summer, I put basically all my older notes up for sale - often for more than the sum of the remaining payments. And they ALL SOLD. I don't honestly know what the HELL the buyers were thinking of. I speculated then ( and still do, a bit) that there's some money-laundering involved though I'll be darned if I know how it would work.
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  #584  
Old 04-11-2013, 12:08 PM
core_dump core_dump is offline
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Originally Posted by gregorit View Post
Given LC's stated desire to cater towards more institutional investors, what impact do you think that will have over the next year or so as they ramp up for an IPO? My concern is, again, things getting stacked against retail folks. (My thinking is that the loan quality available to retail will go DOWN.)
I'm having trouble thinking of ways they would/could stack things against retail investors. I get the impression that new in-funding notes take over a day to become funded so you have plenty of time to buy in. And I have a hard time believing an institutional investor would start plunking down $10k+ on a single note, thus buying it completely out. Would make more sense to diversify.

If the borrower volume is there, that is. If they attract investor money in volume (retail/institutional it matters not) without a corresponding increase in borrowers, then something's gotta give. I'm guessing they'd have to start approving some of these 90% of loans that get denied.

If LC started making certain filtering tools available only to big players, then yeah I'd be a bit ticked off. Their site leaves much to be desired and they know it. Using the site's own limitations to favor institutional guys seems wrong on so many levels. I can't think of any other ways to stack the deck though, at least none that would fly.

Regarding the IPO, my beef with that is liquidity on the trading platform will not be there when you want to get out. They have said that after the IPO there will no longer be trading-only states so normal investors from formerly trading-only states now won't need to ever visit the trading site. Until they want out, and then good luck.

Quote:
Originally Posted by gregorit View Post
Also - I'm not sure I'd have the time and patience to manage hundreds of notes - is there some way for FolioFn traders to take advantage of the "Portfolio" feature availble to those doing direct investments with the notes? (It shows as option from the home page if you're NOT logged in, under "Build a portfolio")
I haven't played with it because I don't have access, but I highly doubt they'd make such a tool which grabs the notes from the secondary platform. They don't really make anything from people trading, FolioFN does, and this is just money that could have gone to funding new notes which is what they want.

I was on the phone with Prosper a year ago and when I told the guy I would be doing more trading than anything else, he practically treated me like a leper. "So you won't be participating in funding any new notes?" Ummm no, sir I won't. I'm sorry if that offends you.

If they did come out with such a tool, I'd be first in line to use/abuse it. Think of it, if you figured out exactly what criteria the thing uses to buy notes on the platform, you could buy up notes as sellers post them and be guaranteed to be able to sell them at an exact known price the next day. Talk about risk free money.

Quote:
Originally Posted by gregorit View Post
I don't even see why a negative YTM sale should be allowed
It does clutter up the listings but I would not want to see them become nannies like Prosper is and try to protect people from themselves. As Mama Zappa said, these notes do sell. If people want to buy them, let them. I certainly don't mind if they're laundering money or doing anything else sneaky, because all I see is a bunch of profit for me when I sell one. I hope they're getting something out of it too.

Quote:
Originally Posted by gregorit View Post
nor why someone would be trying to dump a note with ONE payment left. Seeking the additional liquidity associated with $1.37 just seems pointless when the pay-off is right around the corner.
As payoff time nears your yield becomes negative. So it would make sense that they would not want to hold onto things that are going down in value. Only thing is they're not taking into account the 1% sell fee. So really it makes no difference math-wise.

But there is a chance that the person won't make that last payment, so if you can sell it at an ok price it makes some sense. Also there's the issue of a note being changed to 'Completely Paid' status, but you still have like 30 cents that you are owed. You'll never receive that. (I don't know if anyone here ever figured out exactly what was up with that.)

Buyers buy up these small notes like crack addicts. I have no clue why. The seller would be much better off selling them for the max 70% markup price rather than being so eager to part with it at par.


Quote:
Originally Posted by Mama Zappa View Post
I speculated then ( and still do, a bit) that there's some money-laundering involved though I'll be darned if I know how it would work.
I gotta wonder if it might have something to do with taxes, since LC doesn't really properly track your basis. I'll be darned if I know how that would work either though.

The most innocent explanation is user error. I know for me, after spending hours pouring over listings it's easy to get the columns mixed up. Is that "-5%" a discounted note or the yield?
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  #585  
Old 04-12-2013, 10:48 AM
gregorit gregorit is offline
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>I certainly don't mind if they're laundering money or doing anything else sneaky, because all I see is a bunch of profit for me when I sell one. I hope they're getting something out of it too.

When the SEC freezes the companies activities for some illegality, and you have money in it, you'll mind. A lot.

In all seriousness, I don't think the company is going to get caught up knowingly in some illegality, especially if they're still trying to set the stage for a blow-out IPO.

My last question, I swear (at least for the week): Who gets the payment if you purchase a note that has a payment due date prior to the date you acquire the note but the payment itself still shows as "Processing" at the time you acquire the note?
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  #586  
Old 04-12-2013, 11:00 AM
Mama Zappa Mama Zappa is offline
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Originally Posted by gregorit View Post
...
My last question, I swear (at least for the week): Who gets the payment if you purchase a note that has a payment due date prior to the date you acquire the note but the payment itself still shows as "Processing" at the time you acquire the note?
There's a day or so from when you commit to purchasing the note, and the purchase completes. If the payment comes during that time, the purchase is canceled, or so it seems based on a couple of notes I've sold (or attempted to).

If the payment completes *after* the sale, the buyer gets the payment.
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  #587  
Old 04-12-2013, 11:08 AM
core_dump core_dump is offline
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When the SEC freezes the companies activities for some illegality, and you have money in it, you'll mind. A lot.
Heh yeah I think I would. However yes I think we're talking about individuals or wise guys taking advantage of a channel, rather than LC being involved whatsoever. Doubt the SEC would tag them for something which isn't their fault. Errr not that I buy the money laundering thing. I can't think of what someone would have to gain when they could just set up a front company and not take any losses. Or if you wanted to do carding or ACH fraud rather than laundering then there are much better ways.

Quote:
Originally Posted by gregorit View Post
Who gets the payment if you purchase a note that has a payment due date prior to the date you acquire the note but the payment itself still shows as "Processing" at the time you acquire the note?
The buyer gets the payment, assuming the payment doesn't complete until after settlement. If, however, the payment completes during the T+1 time then the trade will get busted almost every time. In the few cases where it doesn't get busted, then I guess that's when you see the weird things that occasionally happen. Mama Zappa has listed a few examples I think. I don't pay that close attention to mine so I don't know how often I get screwed out of a payment.

PRIME accounts

Anyone know what these PRIME accounts are all about? I stumbled across a few random sites discussing them. I guess all it is: They manage your account for you based on a target rate, you can't do any manual investing or trading. (Meaning their SYSTEM manages it, not a human.) You have to have a $25k account balance. The total ripoff is it costs you a 0.8% setup fee. Which would be a whopping $2000 assuming you're wise and wait until after setup to deposit the rest of your cash.

Now how is that different from the 'Build a Portfolio' thing which is free? Why on earth would someone want to pay $2k _and_ have their account limited when they can get the same thing for free? I don't understand.

Last edited by core_dump; 04-12-2013 at 11:12 AM..
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  #588  
Old 04-12-2013, 05:03 PM
gregorit gregorit is offline
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I too was interested in Prime, I found a good summary here: http://www.lendacademy.com/lending-club-prime-review/

For managers and high-net worth individuals, dealing with thousands of notes is probably not something they want to do, paying <1% is a bargain in that situation if the alternative is parking it in some money market fund earning .1%. While I have the time & interest I'm pretty sure I could outperform prime but there's no way I'd want to spend time every day selecting new notes once I reach a certain investment 'mass'.

BTW: .8% of $25K is $200, not $2000.
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  #589  
Old 04-12-2013, 05:19 PM
core_dump core_dump is offline
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Quote:
Originally Posted by gregorit View Post
BTW: .8% of $25K is $200, not $2000.
Doh! Now that was silly of me.

Quote:
Originally Posted by gregorit View Post
For managers and high-net worth individuals, dealing with thousands of notes is probably not something they want to do, paying <1% is a bargain in that situation if the alternative is parking it in some money market fund earning .1%. While I have the time & interest I'm pretty sure I could outperform prime but there's no way I'd want to spend time every day selecting new notes once I reach a certain investment 'mass'.
Yeah but my point is with the automated portfolio builder thing they have, you don't need to to any of that. Just select what general return you want and it selects them automatically. I suppose the advantage of PRIME is it does this continuously so you never even have to log in. And yeah, $200 is a small price to pay.

But regarding those high net worth individuals, they have an even better option:

I just spent 3 hours reading some SEC filings because I got curious about your earlier statement about LC's "stated goal" being attracting institutional investors. Turns out LendingClub has a wholly owned subsidiary called LC Advisors, LLC, which is in turn a general partner to two funds for accredited investors. Hedge funds, if you will.

These funds buy notes from LendingClub and those notes are not subject to the 1% servicing fee. The funds themselves though charge a management fee which may be waived. Stacking the deck you say? Maybe they agree. They say this in the prospectus:

Quote:
In order to deal with any potential conflicts of interest regarding the funds and the self-directed investors, we have established a mathematical allocation of all new loans listed on the platform in order to provide accessibility to all loans for investor members. The allocation calculation is undertaken daily and limits the amount of investment the funds may place into any loan during the first three (3) days of the loan’s listing. The allocation is based upon capital available in the funds during the measurement period and cash deployed by self-directed investors prior to the measurement period. We believe that this mathematical allocation reduces the potential conflicts between the funds and self-directed investors.
And for better or worse, they also say "The funds do not participate in the resale platform."

I found tons of interesting nuggets buried in there.

For example, while I always knew that you weren't making a direct loan to the borrower, I had no clue it was set up like a derivative in which it's a whole _separate_ deal which is just tied to the performance of the borrower. Sounds a lot like those infamous CDO's, to me.

Or how about this one: On a 5 year note, say if the borrower gets behind and temporarily stops paying say around the 4.5 year mark, any funds recovered by LC after the 5 year mark they keep for themselves.

Quote:
Given the fact that Lending Club is not obligated to deliver any funds received by it after the final maturity date of a Note and is responsible for collection efforts, a conflict of interest could exist as any delay in receiving borrower funds would result in additional money coming to Lending Club.
Yeah I'll say. The reason they give elsewhere is that some of that interest money paid out to us wouldn't be tax deductible to them.

Last edited by core_dump; 04-12-2013 at 05:22 PM..
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  #590  
Old 04-19-2013, 01:39 PM
Mama Zappa Mama Zappa is offline
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Originally Posted by core_dump View Post
...
Or how about this one: On a 5 year note, say if the borrower gets behind and temporarily stops paying say around the 4.5 year mark, any funds recovered by LC after the 5 year mark they keep for themselves.....
Wait - what???? Where did you find that???

On a different note (hah): I had one loan that was trying to go south. Due 4/2, hadn't paid, I decided to list it, and finally sold it for a discount - 15 dollars on nearly 21 in principal. The borrower's score had dropped 30ish points in recent months, and another **60** this month. As of 2 days ago, no payment, but I just looked now and it's been brought current. Oh well; another buyer may have gotten a bargain. At least this one was intentional on my part (not like the **twice** last year where I listed something for 10 dollars cheaper than I meant to ). The other bad loan from a few months ago, that I sold for 3 dollars (on a similar principal figure) was recently classified as defaulted.

I've decided to make a concerted effort to review and offer for sale all my notes where the score has dropped. Where it's a few points, I'll usually list for current P+I plus 1 month's interest - say the principal is 19.00, 15 cents in interest has accrued, and last month's interest was 18 cents, I'll go with 19.33 plus enough to cover the sales fee (20 cents), and list it at 19.53. A loan where the score has gone down more than that, I might list at the P+I plus the fee (19.34 in that example); if I'm really twitchy I'll even bump it down a little. I haven't offered any of those at a discount yet.

This has the interesting side effect of making it hard to reinvest my money fast enough!! I filter for rates from A-D, must have verified income, must not be relisted, and no delinquencies in the past 2 years. And there've been numerous times lately where that has brought up 2 loans at most, sometimes less.

I still review every loan I pick - must pass the smell test (like those wacked-out loans where the rate and payment would increase), and I won't select anything where the payment is > 10% of their income.

LC claims that my net annualized return is 10.13% right now (though of course that doesn't take into account the sold notes). Quicken says 8.47% overall (8.38% this year) which is probably more accurate, though of course its figures are skewed by the fact that I aggregate the normal repayment/interest/loan figures on the last day of the month. My net profit in 3.5 years is slightly under 300 dollars - which doesn't sound like much until you bear in mind that I haven't put a huge amount of cash in. 20 dollars here and there takes a while to add up.
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  #591  
Old 04-19-2013, 02:03 PM
amarone amarone is online now
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Quote:
Originally Posted by Mama Zappa View Post
This has the interesting side effect of making it hard to reinvest my money fast enough!! I filter for rates from A-D, must have verified income, must not be relisted, and no delinquencies in the past 2 years. And there've been numerous times lately where that has brought up 2 loans at most, sometimes less.
I have commented before about how difficult it has become for me to find loans that match my saved criteria, but it has recently become impossible. More often than not, I get zero matching loans. The reason is that Lending Club seems not to be doing its job of approving loans and verifying income.

I just looked at the site and there are 143 loans awaiting funding. Of these NONE have a review status of "approved" and only 3 have income verified.
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  #592  
Old 04-19-2013, 02:09 PM
Mama Zappa Mama Zappa is offline
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I think part of it is that the ones that *are* approved / verified are snatched up so quickly. Now, I'm small-potatoes enough that it's not that huge of a deal if I have to wait a day or so, but if I had a lot of money that needed to get to work it would be a problem.

I wonder if part of it is the institutional investors grabbing stuff up.

I have also had a very small handful of E-class loans - two, I think. I wound up selling them after a few months, interestingly both had a significant improvement in their credit scores.
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  #593  
Old 04-19-2013, 02:14 PM
amarone amarone is online now
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You could be right. In general, loans go quickly now. The 143 of a few minutes ago is now 140. The oldest still has 11 days to run, and all the others are 12 or 13 days, suggesting that all loans get filled within a day or two.
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  #594  
Old 04-19-2013, 02:26 PM
amarone amarone is online now
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Now 132 - 8 loans have filled in 12 minutes. Maybe I need to try buy loans in the morning - last night there were just 105 available.

Anyone know when they release new loans? Is it first thing in the morning? Or at various times during the day?
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  #595  
Old 04-19-2013, 04:13 PM
amarone amarone is online now
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At 4:45 there were only 76 loans open. There are now 139, 6 of which have verified income, 2 have approved status. Two have both (but would fail my other filters).

In fact, the number of loans keeps going up and down. It rapidly went down to 136, up to 137 back to 136.
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  #596  
Old 04-19-2013, 04:53 PM
core_dump core_dump is offline
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Wow, being in a trading-only state I had no idea new notes were in such short supply. Sounds like there may be some money to be made lately by snagging new loans right after they're issued and reselling them?

By the way the LC hedge funds only gobble up about 10-30% on average (from memory) of a given member loan. And that's including what they grabbed after their self-imposed 3 day waiting algorithm. However that might work. Plenty of other institutional investors though I guess. How long before we see an ETF on the market which only invests in LC notes? That might be interesting, especially if it was optionable.

Quote:
Originally Posted by amarone View Post
In fact, the number of loans keeps going up and down. It rapidly went down to 136, up to 137 back to 136.
That could be just noise. I believe it might have something to do with their load balancing or some other technical issue. There is stale data all over the site at certain times of the day. The same thing often happens with data on notes. Will go from 35 payments remaining to 34, back up to 35... for 24 hours plus.


Quote:
Originally Posted by Mama Zappa View Post
Wait - what???? Where did you find that???.
It's in the current Prospectus, dated November 28th 2012. There's a link to SEC Filings at the bottom of LC's site. The details of this issue are sprinkled throughout the document but they sum it up fairly clearly way up on page 6:

Quote:
  • Three-year Notes extension of maturity date
    Each three-year Note will mature on the initial maturity date, unless any
    principal or interest payments in respect of the corresponding member loan
    remain due and payable to LendingClub upon the initial maturity date, in which
    case the maturity of such three-year term Note will be automatically extended
    to the final maturity date of five-years from the date of issuance.
  • Five-year Notes no extension of maturity date
    The initial maturity date and final maturity date for five (5) year Notes are the
    same date, five years from the date of issuance. Unlike three-year term Notes,
    the term of the five-year Notes will not be extended.
  • Treatment of payments received after final maturity date
    If any amounts under a corresponding member loan are still due and owing to
    LendingClub after the final maturity date, LendingClub will have no further
    obligation to make payments on the Notes of the series. In the unlikely event
    LendingClub receives payments on the corresponding member loan after the
    final maturity date, LendingClub will not make any further payments on the
    Notes of the series.
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  #597  
Old 04-23-2013, 09:08 AM
wguy123 wguy123 is offline
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301 36-month loans available. Of that 301 - zero have been approved and zero have had their income verified. Is LC just stopping the approval and verification steps?
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  #598  
Old 04-23-2013, 09:16 AM
Mama Zappa Mama Zappa is offline
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Originally Posted by wguy123 View Post
301 36-month loans available. Of that 301 - zero have been approved and zero have had their income verified. Is LC just stopping the approval and verification steps?
Yeah - I saw that last night and it's still true this morning!
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  #599  
Old 04-23-2013, 09:43 AM
amarone amarone is online now
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They released a bunch more loans - at 9:30 this morning there were 447. Zero had income verified and just one was approved.
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  #600  
Old 04-23-2013, 11:30 AM
wguy123 wguy123 is offline
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Quote:
Originally Posted by amarone View Post
They released a bunch more loans - at 9:30 this morning there were 447. Zero had income verified and just one was approved.
Now it is down to 128 36-month loans with no approval/verification. I guess they don't need to do those steps....they are selling like hot cakes!
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