Bad Debts/Recoveries

Many thanks Jimbo for digging out your data and your further comments on them.  It certainly helps to provide a better picture of how things are progressing on defaults/bad debts. One further piece of information that would be useful is the number of loans you had across the same time period or a percentage of failures to you total investment.

I am a relative newbie compared to you and I only have just over a years worth of data to work with, so am a little bit in the dark statistically. This is further skewed by the fact that I was a cautions investor for the first couple of months and reached a peak about six months after that, followed by what I believe is termed a tactical withdrawal to a much more moderate level. However I had another look at my figures and it seems that currently I am running at approximately a 3% loss rate by number but 4% by value. I can live with this - just but would not like it if it got much worse. 

My motivation for starting the thread was two largish investments going down in close succession and several more suddenly running late. Of the late ones I guess another three will eventually turn their toes up and there is not much I can do about that. I must admit the ones that really rankle are the ones that blow out in the first couple of months or so. In these cases I first get mad with myself for not spotting problems in the DD phase but subsequently cannot see any evidence in their submissions for funding and eventually conclude that we have simply been conned.

"All told, my defaults have lost me 37% of my interest at the present time, although I've been having a much better time of things this year, so have been catching up nicely. I figure if I can keep my defaults to the low single digits on an annual basis, I'm doing okay."

Oh! That's interesting. We read in various places how people have had disasters on FC and lost or made nothing. This has not been my experience. Green Old Grumpy started (nervously) in FC last mid December, and switched off auto bid after the first ten minutes (thank goodness).

I am currently in 649 businesses, lots of fairly small loans with a few larger ones, (each <1.2% of total). Despite the infamous Breadth of Fresh Chair , defaults have cost me 8.6% of my interest (of that, 6.1% is B of FCh). Clearly I have been relatively lucky.

Yes, it does take more time on the computer than is healthy monitoring and bidding, but I do find it quite interesting, and it is the banks that have driven me into doing this by ensuring that the interest they give me represents lost value while other people boast of what cheap loans they have and the banks make a profit. Sod'em!!

I think you have been quite lucky, oldgrumpy, so far my losses have cost about 12.5% of interest earned, but so far the losses amount to less than the cashback I earned in those heady days of flipping so if I consider the cashback as a sort of provision fund, I've lost nothing.

Back to the recoveries question, maybe one reason recoveries appear so poor is because some severely crippled loans which should have probably been through the default/recovery path have been left limping along as "downgraded". Some of these (e.g. 1017 which is performing like a broken down train, 104 days late on half payments from the guarantor long after the company has gone) look like a default and quack like a default. So, generally it seems, FC don't default a loan until it is already clear that the guarantor isn't going to play ball, which I guess improves their bad debt statistics but worsens their recovery statistics.

I had a look through mine recently and there were a few that seemed due an update. I sent FC an email and they updated me and all of the comments within a few days.