New "Hardship Plans"
In last quarter's update I reported that I've seen a marked increase in Lending Club borrowers that were defaulting on their loans. I've paused and thought about what the circumstances might be for this increase, if it is an anomaly or a trend. Apparently Lending Club has been thinking about defaults as well as it has recently introduced "Hardship Plans" for customers who are having trouble making their payments.
Interest Only Payments
Lending Club's Hardship Plans are designed to allow customer to pay only the interest portion of their loans for 3 months if the customer runs into a life altering event.
Lending Club notes in their announcement that "Hardship plans are commonly offered to borrowers in the lending industry because they allow borrowers time to adjust to a life event (like a medical emergency, temporary job loss, unexpected car or home repairs, death in the family, or other events). "
These plans will become available as of May 4th 2017 and the new data points will also be added to Lending Clubs available reports.
Possibly a Good Move
This program from Lending Club may prove to be a good move. I've seen several of my notes that are paid on time, then slowly become late, then eventually default. I can only speculate that some of these loans may have defaulted due to an unavoidable life event. I'm happy to hear that Lending Club will be working with some of these borrowers to give them an opportunity to regroup after major occurrences.
I expect this to have a positive impact for the lender as well. In the very least there is the possibility that 3 more interest payments will be made then would have otherwise which will push return numbers up, if only slightly. Some loans may even be saved from such a move though I expect those numbers to not be very high either.
Current Return: 5.95%
My Lending Club returns have been experiencing a nice upward trend recently. I'm still keeping a critical eye on the account but the 1% positive upswing in the last 2 weeks has been very heartening. Lending Club is sending good signals that it is paying attention to the platform and instituting programs for the benefit of both their borrowers and lenders. Hopefully that trend continues and I can write the low performance numbers of last quarter off as a dip in an otherwise healthy investment.
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