zcommodore

Exactly 1 year ago today, I made my first post to this blog.  Actually, it looks like I posted twice.  At the time, I was seeing my first group loans go late but still thinking/hoping that at least some of them would cure.  As it turned out, none of them did and I apparently didn't learn anything from them because I subsequently helped several more borrowers fund who have since gone late and will likely default.

I was also still very bullish on lending but was starting to experiment with much tighter standards regarding those not in my group that I would lend to.  For the most part, those tighter standards have resulted in much better performance.  Unfortunately, I've had so many bad results overall, both within my group and prior to tightening my standards, I've mostly quit lending.

As of now, one year later, I'm withdrawing funds every time I get $25 in my account.  Since my last loan in early March of this year, I've already gotten nearly half my initial investment back out, partly due to referral fees.  Once I get my initial investment out, I may relend using "house money" but I may change my mind by then too.

One other effect of my slowed lending has been a slowed number of blog posts.  Since I'm spending less and less time thinking about Prosper, I have less to say about it as well.  I probably won't go away for a long time but I won't be posting a whole lot either.

One thing I may post about is Prosper performance.  In my mind, I've come up with some interesting ideas for software tools to study/analyze performance of loans on Prosper over time.  Given that my real-life job is software, actually doing something about my ideas seems too much like work so I haven't actually sat down and done anything about it.  If I ever do come up with something, I'll post about it and let everyone know.  It would certainly simplify making some of the graphs that I've posted here over the last year so there is some incentive there.

It occurred to me on the way in to work this morning that I hadn't hardly even thought about Prosper all weekend.  Of course, I've been busy getting ready to go on vacation starting tomorrow but still, I used to think about it often throughout the day.  I guess you could say I'm over it now.  I've moved on for the most part.

I see that the latest controversy about Prosper involves whether or not Prosper will sell the bad debts.  At this point, I guess I don't really care one way or the other.  I'm sure someone will figure out something.  In the end, if I get anything, it will be more than I expect right now so that will be nice.  I've mentally written all my 1+ Late loans off so if any of them result in any further returns, I'll be happy.

In the end, I've had a nice peaceful weekend NOT thinking about Prosper.  And I look forward to a couple more weeks of vacation not thinking about Prosper as well.

Later all...

"Loans go late over time."  So says Fred93 and others who have studied delinquency rates of loans on Prosper.  The question in my mind has always been, at what rate? and does that rate change?  Well, I've compiled a lot of data from Prosper's performance page and now have some interesting graphs to present.

First, I want to tell you that I've gone through and collected information from eric's on repurchased loans as I mentioned in a previous blog post. I have subsequently added all repurchased loans and their "late history" back in to all my graphs.  I will be updating some wiki pages as I get time with my updated graphs.  In the mean time, I wanted to share my findings of this study.

First, here's a graph showing what the percent of unpaid loans go late relative to the previous month. (Note that you can click on each graph to bring up a larger version.)

This graph shows all loans since March 2006 through March 2008.  The X-axis is the age of the loans in months.  The graph starts at 1 month and includes all loans 1-2 months old.  The red line is an average of all new lates in a given month as a percent of all current loans in the month.  As time goes on, some loans are paid in full or go late are subtracted out.  Also, lates tend to accumulate so each prior month late totals are subtracted from the current month's late totals resulting in the number of "new lates".

You will notice there are a small handful of months where the datapoint is actually below zero.  These are months where the total number of lates actually went down from one month to the next.  It doesn't seem to happen often but it does happen once in awhile.

One thing I was curious about was whether changes to the Prosper platform, particularly changes related to lender information, made any difference in the rate at which loans went late.  So I broke down the total data set into three different segments: Early loans (March 2006-February 2007), New Extended Data (March 2007-October 2007) and Lender Guidance (November 2007-March 2008).  Here are those graphs:

Keep in mind that the last graph, Lender Guidance, is really too new to draw many conclusions from since there are only ~5 months of data available.  Really, this is true for all the last 6-8 months of data from any of the graphs.  The last data point on any of the graphs is from only one month's worth of data (the oldest month in the data set) so as those loans age and I have time to update the information, the average may change.

Ok, so those graphs are nice but how do they compare with one another?  Well, here's my final graph that shows each of the "average" lines superimposed on one another with the same scale for all of them.

So, what can we learn from all this?  Well, looking at the oldest set of loans, it appears that over time, even considering the fact that the number of current loans is going down, the rate at which they go delinquent seems to go down as well.  The peak rate of going late seems to happen in the first 6 months of the loans age.  Some loans still go late over time but not at the same rates seen in the first 6-12 months.

The earliest loans seemed to go bad at a much higher rate out of the gate but as more information became available to lenders the rate went down initially.  However after a certain period of time, it appears that all loans start to behave in a similar fashion.  Two different things could be at work here: Prosper could be doing a better job of weeding out ID theft and other fraudsters and/or lenders may have enough new information in order to weed out the borrowers who will default right out of the gate.

I intend to track this over time and may post about it again sometime.  I don't anticipate things changing a whole lot but I'm especially interested in how the "Lender Guidance" loans behave so I'll be watching those for sure.  Unfortunately, it will be at least a year before we have enough data to start to make many conclusions about those.

Feel free to comment on this blog or, if possible, I'm hoping to get a thread started in the lobby of the .org forums about this as well.

ETA: After a little bit of discussion on the .org forums, I found a mistake in some of my calculations.  I've made corrections and have updated the graphs above.  It appears that the conclusions are still the same though despite the error.  I've also modified the text of this post to reflect the changes.

I had been thinking about doing this for a long time but never got around to it until now.  I created a list of all loans repurchased by Prosper.  I created this list using Eric's handy loan search tool. One of the cool things about looking at loans on Ericscc.com is that he includes a status history so you can see when a loan switched from one status (current, late, repurchased, etc.) to another.  It appears that Eric started doing this in Aug. 2006 though so some early loans don't have accurate status data.

On the list, I found 3 different categories of loans that were repurchased. Typical fraud loans (presumably) where the real person must have filed police reports stating the loan wasn't their's.  (I'm not convinced this is the case for all of them but have nothing to base this on other than circumstantial evidence and speculation.) A set of 10 loans taken out by Victoria Crawford using stolen identities of people with good credit (including one using her own identity.)  And finally, 66 loans included in the New Agency Test that are being sued by Prosper.

I noticed a few interesting cases on that list.  For example, there was one $25K loan where only one lender bid the entire balance.  The status history is a bit sparse but looking at the loan participants, it appears both borrower and lender were suspended.  Honestly, I can't figure out how/why someone would do this unless they knew each other.  The whole thing just doesn't make a lot of sense.  Maybe someone else can figure out what might have happened.

The first loan in the list of Victoria Crawford loans appears to have been current at the time it was repurchased.  I surmised that it was taken out using her real identity although the name on the listing is male, not female (similar to most if not all the other loans she took.)  I included it in the list because of the date (4/5) that it was repurchased, close to the time all the others (4/3) were repurchased as well.

In the list of New Agency Test (NAT) loans, I found 4 that appear to have started trying to catch up but apparently were "defaulted" and later "repurchased" anyway.  I don't quite understand why they were defaulted (although none were "current") since apparently the threat of a lawsuit was having some kind of an effect.

One other note about these NAT loans: several lenders have collaborated to create a wiki page about the status of the lawsuits by Prosper against these borrowers.  We are trying to create a list correlating the loan numbers with listing numbers and names of the borrowers.  If you have any information you would like to add, feel free to do so.  It is a wiki after all.

I haven't been paying much attention but I just realized that exactly one year and one month ago today, my group got it's 5-star rating.  It lasted a little over 2 months when the first of my now-defaulted borrowers went past 15 days late.  He never paid another dime and subsequently several others stopped paying as well.  As of now, half the loans in my group are late or defaulted, with several in bankruptcy and little hope for recovery.

Oh well.  So much for that idea.  At the time, I thought I was doing pretty well picking the good HR's from the riff-raff.  Even when some of them went late, I thought some might be able to get back on track eventually.  As I said earlier, oh well.  Not much I can do about it now.