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[Fred93]

Fred is at it again.

http://fred93blog.blogspot.com/2009/09/prospercom-dont-mislead-investors.html

In this installment, he discusses misinformation in the recent Washington Post article about Prosper.com, and the long history of newspaper articles misrepresenting the default rate on Prosper.com loans.

[Mtnchick]

Excellent. You should send a link to the Washington Post.

[triad]

I read through a prospectus on Prosper's website.

http://www.prosper.com/downloads/Legal/Prosper_Prospectus_2009-07-13.pdf

I think I figured out a source for the 5% claim--AA rated loans only on page 61.

On page 17, psychobabble.
On page 24, conveniently picks loans from 2007 so it only shows default rates for 2 years, but even then at 12 months, E and HR are well past 5%.
On page 51, even B grade loans are expected to have annual loss of 5.99%.
On page 61, 178 defaults for grade AA / 3526 total loans for grade AA originating for November 2005 to October 2008 gets you 5.05%  using $, it's 6.7%
So:
  5.0% for grade AA For money, it's 6.7% (I used unpaid principal divided by total loaned)               
  9.7% for grade A and 11.5%
13.4% for grade B and 15.2%
17.5% for grade C and 19.4%
20.8% for grade D and 21.5%
32.3% for grade E and 31.6%
43.8% for HR        and 39.6%
                 
And, these are by loan cateogry, not by age.  Elsewhere, Prosper admits that loans that are still being paid on can make the numbers go higher.
And, yes, I'm angry that the now reprinted article is claiming a mere 5% with no qualifier for age of loans or grade.

Using these number, I should have expected 15% of my 6 loans to stop paying, not the 50% I have actually had.
Fortunately, I started slow at $100 a month pin money and found the boards right at month 4.
Credit card companies deserve their 30%.

[Fred93]

http://www.prosper.com/downloads/Legal/Prosper_Prospectus_2009-07-13.pdf
I think I figured out a source for the 5% claim--AA rated loans only on page 61.
...

Yes, it is certainly possible that Larsen spoke the number for AA loans, or some other subset of something.  If it had happened only once we might call it an accident.

And, these are by loan cateogry, not by age.  Elsewhere, Prosper admits that loans that are still being paid on can make the numbers go higher.  And, yes, I'm angry that the now reprinted article is claiming a mere 5% with no qualifier for age of loans or grade.
...
Using these number, I should have expected 15% of my 6 loans to stop paying, not the 50% I have actually had.

Your interpretation seems correct to me.

[tekiegreg]

Fred is at it again.

http://fred93blog.blogspot.com/2009/09/prospercom-dont-mislead-investors.html

In this installment, he discusses misinformation in the recent Washington Post article about Prosper.com, and the long history of newspaper articles misrepresenting the default rate on Prosper.com loans.

Dumb question, why you feel a need to quote yourself in the third person whenever you discuss your Blog posts?  Just curious no big deal....

[Fred93]

Dumb question, why you feel a need to quote yourself in the third person whenever you discuss your Blog posts?  Just curious no big deal....

Actually what Fred93 is doing is referencing his blog-authoring persona in the 3rd person.

Did it once.  Liked it.  Seemed consistent with the Zoidberg avatar.

Don't wanna get too serious here.

[mothandrust]

http://www.ericscc.com/lenders/anton

CL himself is a lender on 1,040 loans, and 200 of them, roughly 10%, have defaulted.

That's double the 5% claim; well, he must be unlucky with his personal picks.

Except that of lenders with 1000+ loans his ROI is #2 of 76.

[Fred93]

http://www.ericscc.com/lenders/anton

CL himself is a lender on 1,040 loans, and 200 of them, roughly 10%, have defaulted.
That's double the 5% claim; well, he must be unlucky with his personal picks.

Except that if he was quoting a default "rate", ie XX% PER YEAR, then the two numbers could be consistent, depending on the age distribution of his portfolio.  (Edited to add: Oh, but you had a typo.  You meant to say 20% have defaulted.  No way that could be consistent with his statement.)

Note that anton's portfolio is heavily weighted toward AA loans.  Something like 36% of his portfolio is AA.  So that isn't anywhere near representative of Prosper as a whole.  Prosper as a whole is 3621/29468 = 12.29% AA  (credit grade AA, ie the old definition of AA, ie credit score> 760, which is I believe what ericscc is still using).  The AA category as a whole has been tracking about 5%/year defaults.  (See rateladder's vintage curves.  Just look at the 390 day point.)

Few portfolios are more heavily weighted toward AA than anton's.  Mine is 50% AA.

Except that of lenders with 1000+ loans his ROI is #2 of 76.

He chose well.

[Beerbud1]

But he has 200 defaults and another 20 on the way.

[pioneer11]

http://www.ericscc.com/lenders/anton

CL himself is a lender on 1,040 loans, and 200 of them, roughly 10%, have defaulted.

Were you in the same math class with the Washington Post reporter?

[Beerbud1]

http://www.ericscc.com/lenders/anton

CL himself is a lender on 1,040 loans, and 200 of them, roughly 10%, have defaulted.

Were you in the same math class with the Washington Post reporter?

No, He's a Prosper cheerleader...He intentionally misleads.

[mothandrust]

http://www.ericscc.com/lenders/anton

Look at the "Loan Breakdown by Status" pie chart on the right: 89% Current, 1% Late, 10% Default.

But then the chart on the left shows 200 defaults and 19% defaulted, so which is it?

If you count the $ amount of the prepays and the current loans, that's about 245K, and he's got 28K of defaults, so that's 11.4%....

[Fred93]

http://www.ericscc.com/lenders/anton
Look at the "Loan Breakdown by Status" pie chart on the right: 89% Current, 1% Late, 10% Default.
But then the chart on the left shows 200 defaults and 19% defaulted, so which is it?

I looked at my own stats on eric's and I found a similar discrepancy.  Seems like something is wrong with his pie chart generation. 

[TotoMMB]

I may be wrong, but the chart could be based on $. $245K current or paid, $3.3K late, $28.3K default.

Out of $276,716.88, his defaults of $28K are 10.26%.

[TotoMMB]

To follow up on my own musing, his numbers aren't as bad as first thought. His paid are at an avg. of $581. His default avg. out to $141. Now, granted, sending Pops Larsen on a cruise and other "bogus" loans are in the numbers, so I won't slap the "Oracle" nickname on the guy...And to account for his current "skin" in the game, his avg. current loan pencils out to $85. Guess he's taking advantage of his own workings (lots of loans at the $25 min.).

ETA = Changed "are" to "aren't"