ira01's blog

@ira01: Ah, I see how did you search by loan rate - you were sorting by it. Thanks for the link!

@ResearchPro:
http://www.lendingstats.com/loans?keyword=&dtiLow=0&dtiHigh=-1&loanAmountLow=0&loanAmountHigh=25000&_rs=1&startDate=2005-11-01&endDate=2007-12-31&accountVerified=&homeOwner=&automaticFunding=&submit=Generate&sort=lenderRate&sortDirection=DESC

So, based upon on your 18 months experience with Prosper you stand by the idea that you know what "these newbie lenders" think and feel, what they are overjoyed with and what awaits them in the future, as in your text above. I see... Well, I wash my hands here...
And of course, making an example with a dosen of mistaken lenders to prove something is very statistically significant approach. Hmm...
Also, I should mention that I didn't mean 35%/25K/AA-A literally, you know... No need to spell out the rates for me after you have set the limit (18%+, 22%+) in the original text.

PS I would be greateful if you show me the link to lendingstats data you have used.

@ResearchPro: OK. First of all, you do have access to the same facts as I used. Just go to Lendingstats.com (which is, unfortunately, about two week out of date at the moment, but will be close enough).

Second, one of the points of my original post wasn't that it was "35% 25K" AA/A loans that were dangerous. To the contrary, as I noted twice above, only 2 of the 8 bad AA loans were for $25K, 1 was for $20K, and the other 5 were $15K or less (and 1 was a mere $4K).

Moreover, none of the 8 bad AA loans was for 35% -- the highest rate was 29%, and the second highest was "only" 22%. Five were 20% or less.

As for my "assumptions" you quoted in your comment, I stand by them based upon my 18 months experience with Prosper and my very active participation in Prosper's former forum and in prospers.org. Of course, only time will tell. Maybe these lenders have found the secret to separating out the 68% of high-rate AA loans that haven't gone 2-months late or worse already from the 32% that have. I truly hope so. But I strongly doubt it.

We've seen inumerable newbie lenders on the forums in the past who show up proclaiming that they have Prosper all figured out and that they are going to kick major ass at lending. Almost invariably, they don't. For an oldie but goodie, check out http://www.prosper.com/lend/listing.aspx?listingID=113206. This blender titled his own March 2007 listing "Prosper's #1 Rated Lender Looking for More," and stated that with an estimated ROI of 27.45%, he was #1 out of almost 4,000 lenders with >20 loans and an average loan age >1 month. He claimed that his "stringent qualifiers" before he loaned was "what has placed me at the top." His current estimated ROI is 4.19% (and it used to be even worse). He hasn't bid since July 2007.

@ira01: I didn't say I question the facts. Even though I have no access to the data you are referring to, I simply agree with your conclusion on high risk for 35% 25K AA-As.
I said that I question your assumptions and judging of people's portfolio plans as "poor" by finding a single weak point, probably not the most influencial.
Here are the quotes:
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Undoubtedly, these newbie lenders think they are funding "low-risk" AA loans, and are no doubt overjoyed with the extremely high interest rates of these loans. They are going to be in for a very rude awakening in the future.
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whose oldest loan is only 44 days, yet he/she has already dumped almost $50K into Prosper.
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Someone ought to do these people a big favor and invite them to prospers.org in a hurry.
***

Prosper posted a response to the TMF article (without ever mentioning TMF!) on its blog. For a complete, point-by-point explanation of why Prosper's response is bullshit, please see: http://www.prospers.org/forum/prospers_response_to_fool_article-t9179.0.html;msg148715#msg148715.

@ResearchPro: I'm sorry, but I have no idea what you are talking about. Which "assumptions are wrong and unprofessional"? As noted in the article, 32% of the high-rate (>18%) AA's originated from Prosper's inception through the end of 2007 are already 2-months late or worse (which basically means that they all probably have or will default, since very few loans come back from 2-months late). That's a fact. And it is horrible performance for AA loans. Moreover, some of these loans aren't especially old yet, so presumably there will be additional delinquencies with time. Also, very few of these loans were especially large, so it isn't $25K loans that ruin the performance for the whole group. If you could explain yourself further, I would be happy to respond.

Many of your assumptions here are wrong and unprofessional. While you have some good poins on 25K 35% AA loans, don't ever assume the other people around you are stupid and don't understand what you do. It could be vise versa.

I think you've just debunked the theory that the current credit crises would drive more people away from institutional lenders and toward the P2P lending marketplace instead.

It would be interersting to see how much of the rate/default correlation washes out when loan amount is accounted for. I have seen other people comment convincingly about the hazards of making AA loans for 25K. I think part of the problem with 25K loans is that it is the max so you really do't know how much money they need (i.e how much trouble they are in).