Quote Originally Posted by myles View Post
I take the comments above, but the point I'm trying to show is the rate/value of defaults per grade. Defaults are not annual, they are total over the life of all loans - the %Loss is based on total invested value per grade, not current or final value (so loss of potential interest is not included).

I take Cool Bears point on fees, so I've added that in - it had no effect on the overall trend, but it could have. Tax is at a portfolio level so I'm not including it deliberately.

I know the last column is meaningless, but I find it to be indicative of the return for the grade.

Updated with 15% loss due to fees:

Attachment 9918

The key thing I take from these values is that the expected, larger default losses for higher grades is not what I'm seeing. So selection criteria can impact expected defaults and averages - significantly.
Further to Coolbear and Snow Leopard, That analysis although interesting overlooks much. Defaults, will create a drag on your return - due to the capital not being recuperated so interest is foregone.

Fee should be applied against all interest.

Early repayment amplify's the impact of default, especially in the higher grades. Without the benefit of your data, would say your E5 grade is returning closer to 12% rather then 19%. See attached.

Capture.JPG

That said your DEF grades are performing very nicely, and well below the predicted static loss ranges indicated by HM, so you must a knack for risk selection