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[leporello]

I'm not following why, in the spreadsheet, the "Defaulted (Bankruptcy)" row has 0% and $0 in the "expected default %" and "$ total" columns, respectively?  Shouldn't it be 100% like the "Defaulted (Delinquency)" row?

That's very easy to explain. It's called a howling error on my part! I really must be more careful when I post this stuff. A corrected spreadsheet is attached, which shows the LepIra projected defaults now at 22.1%

And is it assumed that the odds of a borrower who reverses a payment which PIF'd the loan and then goes on to default too insignificant to consider?  I would agree that this would be quite rare.  But I thought I'd mention that technically, I think PAID loans still have a 60 day window of defaulting.

I haven't taken that consideration into account at all, but if anyone has any stats on that kind of event, I'll be glad to incorporate them.

[leporello]

The assumption is that
*   50% of currently "Late" loans will default,
*   85% of currently 1-month-late loans will default,
*   90% of currently 2-month-late loans will default,
*   95% of currently 3-month-late loans will default, and
* 100% of currently 4-month-late loans will default

From the spreadsheet, I gather these are percentages of the original loan values, not of the outstanding loan balances at the time of default?  If yes, I think on the whole, the resulting numbers are a bit too pessimistic.

That is correct. This is intended to be a back-of-the-envelope calculation, not a Fred93-esque scholarly treatise!

[traveler505]

Looking at this page:

http://www.lendingstats.com/loansFunded

It appears that, by the time loans originated in February 2007 or earlier are one year old, they settle in to a rather consistent range of 20%-25% late/defaulted.

It is possible that a new plateau was established in the 15% range for loans originated in March 2007 or later. 

Note that the percentages are calculated based on amount of principal loaned, not amount of principal now due.

[NewHorizon]

The assumption is that
*   50% of currently "Late" loans will default,
*   85% of currently 1-month-late loans will default,
*   90% of currently 2-month-late loans will default,
*   95% of currently 3-month-late loans will default, and
* 100% of currently 4-month-late loans will default

From the spreadsheet, I gather these are percentages of the original loan values, not of the outstanding loan balances at the time of default?  If yes, I think on the whole, the resulting numbers are a bit too pessimistic.

That is correct. This is intended to be a back-of-the-envelope calculation, not a Fred93-esque scholarly treatise!

OK, I can live with that.    But of course the significance of this inaccuracy will grow over time as the average defaulted balances - as a percentage of the original loan value - decreases (as I think you already know).  So you might find yourself compelled to address this at some point in the future.

As for data on PAID loans which go on to default, I wouldn't be surprised if it hasn't even happened (yet?).  But I just thought I'd stick that possibility into people's noggins. 

[leporello]

It appears that, by the time loans originated in February 2007 or earlier are one year old, they settle in to a rather consistent range of 20%-25% late/defaulted.

That's a great way of looking at the data. Thanks for pointing that out, Trav!

[ks6328]

The assumption is that
*   50% of currently "Late" loans will default,
*   85% of currently 1-month-late loans will default,
*   90% of currently 2-month-late loans will default,
*   95% of currently 3-month-late loans will default, and
* 100% of currently 4-month-late loans will default

From the spreadsheet, I gather these are percentages of the original loan values, not of the outstanding loan balances at the time of default?  If yes, I think on the whole, the resulting numbers are a bit too pessimistic.

That is correct. This is intended to be a back-of-the-envelope calculation, not a Fred93-esque scholarly treatise!

I took it to be the number of loans.  NH is talking about dollars, and specifically the original loan amount.  You're agreeing with him.  Are you sure that you should be?
 

[leporello]

I understand your point, and I did not express my assumptions clearly. I should have said the following:

The assumption is that
*   50% of the dollar value of currently "Late" loans will default,
*   85% of the dollar value of currently 1-month-late loans will default,
*   90% of the dollar value of currently 2-month-late loans will default,
*   95% of the dollar value of currently 3-month-late loans will default, and
* 100% of the dollar value of currently 4-month-late loans will default

[NewHorizon]

Just fwiw, I thought the spreadsheet was already straight-forward on the "dollar value" thing...

[leporello]

Agreed, but my assumptions as I wrote them out did make it sound like I was counting the # of loans, and not the $ value, and I wanted to clarify that for ks6328's benefit.

[Capital_Finance_Group]

anyone care to convert this to an annual default rate?

In layman's terms - "a heaping whole bunch"