zcommodore

A couple of weeks ago, Bama and I got into a discussion about whether or not Prosper was pushing through a lot more loans at the end of the month.  I eventually agreed that there was some evidence that this may be the case.  Well, now I have another explanation and that is borrowers may actually be the ones who are setting their origination dates for the end of the month.

First, here's an updated version of my daily loan origination graph after a couple more weeks of data:

As you can see, since the end of the month, the 10-day average has steadily dropped after it peaked right at the end of the month of July.  This steady drop is part of why I agreed with Bama that Prosper was pushing loans through at the end of the month.  Note also that in the first part of the graph, there is a peak roughly once a week at regular intervals but the last few weeks of the graph, peaks vary a lot more.

One fact occurred to me recently and that is Prosper made a change to the loan origination process a few weeks ago.  Here is a quote from their June 24 blog:

As of today, borrowers will be required to return to the Prosper site and sign the promissory notes which evidence their loan, before loan proceeds are disbursed. Until now, borrowers have not had to sign all of the notes themselves because they authorized Prosper to do so on their behalf.

This change caused a bit of discussion among lenders about whether loans prior to June 24 were legal or not.  I'm not going to comment here about that.  The interesting artifact of this change is that now borrowers are the ones who "control" the origination date rather than Prosper.

Traditionally, when looking at the number of loans originating on any given day, the 2nd business day of a given week had the most loans by far compared with the rest of the week.  Recently, though, I noticed that I often would see a different day of the week have more loans than Tuesday.  Here is a graph showing the number of loans originating based on the day of the week:

As you can see, Tuesday is usually the top line until the last few weeks with a couple of notable exceptions.  The first non-Tuesday peak corresponded with April 30th, a Wednesday, when Prosper originated more loans than they have ever originated on any other day in their history.  This peak certainly supports Bama's theory since Prosper was in charge of when loans originated at that time.

The following week there was a "low peak" on a Thursday which I have no explanation for.  Later, in late May, we see a "Wednesday peak" but it followed Memorial Day so it is "typical".  Nothing else is really notable until we get to the middle of July.

Keep in mind that usually, when Prosper makes a change, the changes don't take effect retroactively.  So, most likely, all loan requests that were submitted prior to the June-24th update did not require the borrowers to "accept" the loan.  So really we wouldn't expect to see much difference in loan origination dates until a week or two later, roughly corresponding with the middle of July.  Since that time, Tuesday is the "peak day" only twice and one of those times only barely so.  This tells me that borrowers may be waiting to "accept" a loan until they decide when they want it to originate rather than Prosper "pushing" through a lot of loans.

I haven't actually communicated with any borrowers about this and I have no idea what Prosper may tell them in their communication.  However, it is an interesting possibility so I thought I'd share.