Secondary market pro tip
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Our own Summer Tucker introduces you to
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Is the secondary market right for you?

Now that investors are becoming more familiar with peer-to-peer lending and purchasing on the primary market, we have seen an increase in interest in the secondary market.  To help you better navigate the waters, let's take a deep dive into the characteristics of the notes currently listed, talk about "fast flips", and end with an analysis on pricing.

What loans are available on the secondary market?
We analyzed the current listings on Folio between June 22-27, 2016.  The following are averages across the available listings:

Note Size: $35
Markup/Discount: +4.12%
Interest rate: 16.71%
Yield to Maturity: 15.39%
Loan Age: 11.17 months
Borrower FICO Score at Origination: 686
Days listed on Folio: 4
Remaining Payments: 39

83% of loans have never been late on payments
89% are current on payments
Even split between FICO scores trending up/down

Interestingly, while the average stated interest rate on Folio is 16.71%, the average is only 13.15% (non-weighted average rate) for the entire Lending Club index of loans. This indicates that investors who sell notes on the secondary market are generally listing notes with lower credit grades as compared to the index distribution of loans.

Correspondingly, below we can see that higher risk notes are over-represented on the secondary market relative to the overall volume of loans issued in those categories. The chart below represents the dollar-weighted proportion of loans listed in each Lending Club credit grade.
What about loans that are listed almost immediately after origination?
Loans that are listed within three months after origination (aka "fast flips," because these notes are bought and quickly listed for sale) have a significantly higher markup compared to all loans listed. These fast flips have an average markup of 5.86%, while the entire sample is only 2.18% (only current loans included).

Here are the loan characteristics of notes that are listed within three months after origination:
  • Note Size: $39.77
  • Markup/Discount: +5.86%
  • Interest Rate: 18%
  • Yield to Maturity: 14.19%
  • Borrower FICO Score at Origination: 692
  • Remaining Payments: 42.95
  • 98.5% are Current on payments
Before purchasing a fast flip, consider the following chart showing delinquency rate by payment period:
Delinquency rates increase quickly after origination - so buying a relatively new note at a fairly high markup can equate to greater risk going into the peak of the delinquency curve.  In other words, carefully consider if it makes sense to buy new notes at a premium given the greater risk.

What dictates markup/discount of a loan on the secondary market?
From the data we analyzed, the greatest correlation with the markup/discount of a note is whether or not the borrower has ever made a late payment - about 40% of note pricing was explained by this metric alone. Other variables with positive correlation to the markup/discount are credit score trend, interest rate, and ask price (higher principal value is correlated with higher markup). A negative correlation was found with attributes such as Inquiries in the last six months, number of remaining payments, days since last payment, and outstanding principal.

We will be releasing our secondary tools to the general public next month. If you would like be part of our beta testing program and gain exclusive access to the secondary tools today, please email or call 720-259-0455.

As always, I would be elated to hear from you personally. Call me directly at 720-259-0472 or send me an email at

Please feel free to forward this letter to your trusted friends. We are open to new investors, and welcome those conversations.

Warm Regards,

Bo Brustkern
Co-Founder & CEO
NSR Invest
Copyright © 2016 NSR Invest, All rights reserved.

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