Congress’s Inability to Enact a Second Stimulus Should Not Impact Loan Performance Reports dv01

The US House of Representatives has refused to cut a deal with the White House and come to terms with a second COVID-related stimulus package as leadership fears it will help the Trump campaign as the election nears. Many observers and policymakers believe a second round of economic aid is needed to assist individuals that are suffering the most as the pandemic lingers. While the legislative brinkmanship may seem silly from outside the beltway, most observers believe a stimulus is forthcoming – it just may arrive after November 3rd.

But how is the missing money impacting online lending and platforms that serve consumers? dv01, a leading data provider covering Fintech lenders, says their data indicates impairments remain below pre-pandemic levels – good news for online lenders.

dv01 says that for the sixth consecutive month, even with initial jobless claims hitting roughly 850,000, overall delinquencies remain well below historical averages. The report claims this is indicative of industry resilience and should “[fend] off any remaining skeptics” and drive interest from investors.

As has been previously reported, many online lenders quickly moved to allow borrowers to access modification programs – skipping a payment or two. These lending platforms realized almost immediately that placing a borrower in default, due to a government-mandated shutdown, was a poor strategy and seeking to create an environment where borrowers would repay their loans. dv01 reports:

“Over 81% of all COVID-19 modified loans have resumed some form of repayments, up from 78% since the previous report (data cutoff date of September 22, 2020). Repayments are increasing at a faster rate each month since March and April, with June and particularly July repayments trending substantially faster.”

It should be noted that many platforms experienced a profound decline in loan originations. LendingClub, the largest online consumer lender, saw originations declined by around 90%, a pretty significant percentage.

But dv01 says that loan issuance volume experienced another month of a strong recovery in new loan volumes. September volume increased 9.5% month over month, similar to the increase in August (but slower than the 20% MoM growth observed for June and July).”

So is this sector finance of out of the woods yet? Who knows. COVID has stubbornly refused to go away and there is no telling when or what Congress will eventually decide to do.

You can read the dv01 report here.

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