zcommodore

Bama thinks Prosper is "churning loans".  He seldom lets facts get in the way of a good conspiracy theory, but lets look and see if there's any merit to his assertions.

Here's a graph showing the actual number of loans Prosper approved each business day and a 10-day trailing average to help smooth things out.

As you can see, there's a little uptick at the end of the month.  I haven't been watching the number of listings on Prosper too much but it is a bit curious.  However, if you look at the end of all the previous months in the graph, there's not any strong evidence of an uptick at the end of any of the other months. Fortunately, I have data for each business day for the last 13 months.

I took all 13 months and averaged each calendar day so that I could create a graph with the average number of loans created each day for an entire month.  If Prosper is "churning loans" at the end of the month, we should see an uptick in the number of loans near the end of the month where they approve more loans than the rest of the month.  So, here's what I found:

Well, I suppose there is a slight upward trend as the month progresses but it doesn't seem exceedingly large. At the beginning of the month, there appears to be ~49 loans approved per day up to the end of the month where there seems to be ~56 loans approved per day.  Most of the month appears to be fairly flat though, right around 50.  Note that the "5-day Avg" line is an average of each average plus the two days before and after, wrapping around from beginning to end.

So, why is there an increase near the end?  Prosper may actually be "churning" loans to some extent so that is possible.  Honestly, I can't really think of any other good reason for the increase either.  Still, a 6-10 loans-per-day increase doesn't really strike me as strong evidence of significant "churning" either.

One thing I do know and that is the 2nd business day of any given week has a significant increase in the number of loans approved.  I attribute that to the fact that all funded loans that end between late Friday evening until some time Monday afternoon can potentially originate on the following Tuesday.  For this reason, I like to track loans by the week rather than by the day since this smoothes out the data much better.

Based on this graph, it's unclear exactly which direction Prosper's loans are going in the near term.  If anything, it looks like Prosper has peaked and is going down.  However, I do remember Prosper had a big advertising push a couple of months ago that corresponded to the spike in loans, in addition to going (almost) nationwide with a common interest rate.  Those two things contributed significantly to the spike I believe.  The question is whether or not Prosper is planning any more advertising.  Ultimately, Prosper can't "churn" loans if they don't have at least a few willing borrowers and lenders unless they're creating fake loans and/or bids.  Now *that* would be the ultimate conspiracy theory.