Debt sale cancelled? Sucks or what?

[xraider]

I can't predict the future, and can't predict how many of the current 4+ dqs will go bk in the next few months.

Prosper is playing with fire trying to time the market with no basis for determining (1) when the market might improve; (2) how much value will be lost in the current dqs as Prosper tries to time the market (will these dogs lose 1% per month? 10%?; and (3) how many loans go bk, resulting in a complete loss to the lenders on that loan?

If my 4+ lates go bk as Prosper plays games trying to time the sale, I would ask Prosper to cover that loss.

There is a contract in place.  That contract does not allow Prosper to time the market or otherwise make judgment calls on when it will perform.

[iLIE]

I want the loans sold even if they have to give the whole lot away for 1 cent.

Next month that penny may be off the table.I hired Prosper to service my loans & sell the debt at 120+ late,not enter negotiations for an untold period of time.

I suggest you guys look up the meaning of "fiduciary"

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom they owe the duty (the "principal"): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust, and the word itself originally comes from the Latin fides, meaning faith, and fiducia.

[Mtnchick]

Bama's on a roll recently with actually being right

[j9359]

Bama's on a roll recently with actually being right

Quoted so you won't be able to deny it later
john.

[Chamatrain]

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom they owe the duty (the "principal"): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust, and the word itself originally comes from the Latin fides, meaning faith, and fiducia.

As a "new guy," I've felt for several months that PMI is blatantly breaching this responsibility, and that it probably ought to be pointed out to them in court (IANAL.)  But, I've been "just riding along," and figuring that Joe will do it, or George, or Susi, or whomever.  Maybe we're getting closer to the time when I/we/us/you/ demand that PMI answers for negligence.

[onthefence]

Next month that penny may be off the table.I hired Prosper to service my loans & sell the debt at 120+ late,not enter negotiations for an untold period of time.

I suggest you guys look up the meaning of "fiduciary"

But if prosper followed it's fiduciary duty, then it's performance tab data would look bad and no one would want to lend on prosper, or at least they would demand much higher interest rates that would send borrowers back to traditional banks or scare them off completely.

[joezyz]

But if prosper followed it's fiduciary duty, then it's performance tab data would look bad and no one would want to lend on prosper, or at least they would demand much higher interest rates that would send borrowers back to traditional banks or scare them off completely.

And the problem with this is?  This is supply and demand....

[christoofar215]

Next month that penny may be off the table.I hired Prosper to service my loans & sell the debt at 120+ late,not enter negotiations for an untold period of time.

I suggest you guys look up the meaning of "fiduciary"

But if prosper followed it's fiduciary duty, then it's performance tab data would look bad and no one would want to lend on prosper, or at least they would demand much higher interest rates that would send borrowers back to traditional banks or scare them off completely.

What is making it worse is Prosper is not doing enough verification NOW while lenders are growing and pouring more money in... they could reduce the potential for default on the new set of loans while we already know what is going on with the current set.  Lenders are going to stumble upon Lending Stats and find .org eventually... why not just have the massive debt sale now and clear the books?

It is easier to be truthful now than to let this go on for another 6 months and also let the new originations since December lapse and make this pile of turds even bigger and turn it into such a big scary JDS that once it does sell it will cause Prosper to shut down just from all the bad publicity.


If I was CFO, I'd be cruising CreditBoards to see who looks like the most ruthless JDB out there, and offer them the whole batch of debt including the loans that went 4+ just yesterday, and push it completely off the system to sold status, then focus on the loans that are still in the pipeline and the new ones coming in the front door.

The problem began with the crap listings.  Why Prosper isn't pre-screening listings or at least demanding money up front to put up listings to scare off the really awful borrowers I have no idea.

[Mtnchick]

The problem began with the crap listings.  Why Prosper isn't pre-screening listings or at least demanding money up front to put up listings to scare off the really awful borrowers I have no idea.

Simple - it's not their money on the line, it's ours.

[Staneslav]

The problem began with the crap listings.  Why Prosper isn't pre-screening listings or at least demanding money up front to put up listings to scare off the really awful borrowers I have no idea.

Simple - it's not their money on the line, it's ours.

Never trust someone who originates a loan but isn't willing to hold the note. That's caused a lot of trouble lately.

[ira01]

Why Prosper isn't pre-screening listings or at least demanding money up front to put up listings to scare off the really awful borrowers I have no idea.

These two questions got asked and answered numerous times on Prosper's old forum:

1)  It isn't feasible to conduct verification of listings up front, because even back then only about 10% of listings funded (not sure what the percentage is now).  So verifying all listings up front would multiply Prosper's workload (and the attendant expenses) by a factor of 10-20.  Prosper can barely keep up as it is.

2)  Andrew posted that there were at least two reasons why Prosper didn't charge a listing fee.  First, it would make Prosper seem like a scam to borrowers, like all the other internet loan scams involving up-front fees.  Second, it would have been illegal.  Now I have no idea if that last part is true or not -- we all know that Prosper's legal counsel has been spotty at best, and Andrew never posted the specifics (i.e., the particular law or regulation that an upfront fee would violate).  I also don't know if Prosper's recent alliance with WebBank makes what previously may have been illegal, legal. 

[iLIE]

First, it would make Prosper seem like a scam

Mhhh.Can you explain how it isn't a scam?

borrow at 7%..Lend at 12%..I'm still not seeing how that works.

[mothandrust]

Are you sure?  What if the JDB's offer 0.00001% (that would be 65 cents for the $6.5M portfolio) -- should Prosper take it?  If you say "no," then we are really just haggling over the price* that Prosper should accept, not whether there should be a minimum price.

65 cents?  The JDB is in for a snickers, literally.

[ira01]

First, it would make Prosper seem like a scam

Mhhh.Can you explain how it isn't a scam?

borrow at 7%..Lend at 12%..I'm still not seeing how that works.

Everyone knows that I am one of Prosper's loudest critics regarding its advertising practices.  But these two claims are not necessarily inconsistent, as you well know.  "Super-prime" borrowers can get smallish loans for 7%, and some lenders can get 12% returns (obviously by generally not bidding on the "super-prime" loans). 

According to Lendingstats, there are 521 Prosper loans with a lender rate less than or equal to 7.0%.  And there are 542 lenders with >20 loans and an average loan age >6 months with a projected ROI of 12% or more.  That is 5.1% of such lenders.  Of course the LS ROI's are too high right now due to the high average age of the large number of 4+ month lates (coupled with the erroneous way that LS calculates the payments made by 4+ month lates), but even after the debt sale there will still be a non-trivial number of seasoned lenders with >12% ROI's.  And while some of the low-rate loans are family loans, most do not appear to be. 

[Risk_Reward]

P-----r is completely different than CC companies or mortgage companies because IT'S NOT THEIR MONEY that they've loaned. Not a dime. This is the only credit type I can think of with this business structure. IOW, they have zero financial incentive to take anyone to court.

Actually, most of the mortgage market is run this way.  Only a small fraction of mortgages is held on the originator's books.