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[Fred93]

Fred reacts to Doug Fuller's blog about the legal test failures
http://fred93blog.blogspot.com/2009/11/prospercom-paradise-lost-deadbeats-won.html

It was a hot Saturday afternoon, August 5th 2006. I was driving to Long Beach to have dinner with a bunch of folks -- 25 fellow Prosper.com lenders -- who I had never met. ...

[mothandrust]

Great blog, Fred.

I have to wonder how different an animal Prosper would be if Prosper were a 50% owner of each loan and lenders bid on the other 50%.

They would have the incentive to apply due diligence before the loan was made, verify the ID/income of the borrower, have an incentive for the loan not to fall into collections (lose 17% of payments), and on these test loans they would serve by publication instead of just giving up.

How different is this from the mortgage originators who didn't care about loan quality because they could slice them up and sell them to third parties who would assume all the risks?

[Fred93]

Great blog, Fred.

Thank you.

I have to wonder how different an animal Prosper would be if Prosper were a 50% owner of each loan and lenders bid on the other 50%.  They would have the incentive to apply due diligence ...

You understand.  Want a job as new CEO?

How different is this from the mortgage originators who didn't care about loan quality because they could slice them up and sell them to third parties who would assume all the risks?

In my opinion it is exactly the same.  In fact, you may recall that many of us had a lot of confidence in Chris Larsen early on because of his credentials ... He started E-Loan.  But what was E-Loan?  It was one of those guys creating mortgages without bothering with the details, and passing them on.  He was, in short, part of the problem.  The bank (Popular) that bought E-Loan from him shut it down.

[xraider]

Great blog, Fred.

I don't understand why ANY VC would want Prosper, with or without Larsen.  The ill will toward Prosper is tremendous, and likely too significant to overcome.  Even with new VC and no Larsen, and with shaky Prosper owning 50% of the loans, who would buy a piece of the other 50%?  I'd think that Prosper is too financially iffy to make coowning debt with Prosper a very risky proposition.

[NewHorizon]

Not deriding the previous blog posts, but this one seemed better written than the rest.
Did you have help?

I think I wudda supported the "censored and censured" comment with more detail.
But then, it's not my blog.  

"What did they do to find these people? They don't say."

Actually, I thought he did...?

How could we be so stupid as to file a suit against a person using the wrong address? This is a real annoying one. Having the right address is critical to success of a legal strategy. So how did we confirm we had the right address? In the past, I have been successful at using a combination of information from the Lexis-Nexis Accurint service with the results of mailing first class letters to the target address.

In previous testing, the Accurint “best address” was found to be correct more than 70% of the time – by applying some additional criteria, the confidence level on the address could be increased to almost 85%. In separate testing, it was shown that the USPS return mail process was approximately 60% effective (meaning that a letter mailed to an inaccurate address would be returned within a month 60% of the time).  Furthermore, we preformed a second round test in which the addresses on which no return letter had been received were sent a second letter – again approximately 60% of these were returned within a month of mailing.

What does all of that mean? It says that using the Accurint best address combined with at least two first class letters that have not been returned (with a month of return time), you have an expected confidence level on the address of 95+% of the time. Clearly that expectation did not apply to this population. At the time that the files were closed, Accurint was still reporting the same address as “best” in 13 of the 16 cases. A subsequent review of the 11 homeowners, show that 10 had foreclosure proceedings started during the summer of 2008.

[Urbi_et_Orbi]

An excellent and very important post.  Deserves to be linked in a number of places.

Thanks, Fred.

[Mtnchick]

Love it!

[bamalucky]

Nicely done Fred.

Did CL pick up the bill at PF's?

[Urbi_et_Orbi]

Did CL pick up the bill at PF's?

My somewhat vague recollection (since I didn't eat anything) is that it was a "pay your own way" kind of thing, but that CL paid for more than his "fair" share.  I think he may have, in effect, bought a round of drinks for the table.

It was a smart and decent move on his part to make the trek down to the event.  We certainly appreciated the effort - and we appreciated hearing the firm promises he made, in no uncertain terms, to aggressively pursue deadbeats and spend a disproportional amount of money to "make examples" of a number of deadbeats.

We left the meeting with CL with increased confidence in the platform and believed that the strong legal strategies outlined by CL to vigorously go after deadbeats made the platform a safer environment for investors.

[ira01]

we appreciated hearing the firm promises he made, in no uncertain terms, to aggressively pursue deadbeats and spend a disproportional amount of money to "make examples" of a number of deadbeats.

We left the meeting with CL with increased confidence in the platform and believed that the strong legal strategies outlined by CL to vigorously go after deadbeats made the platform a safer environment for investors.

I wonder if Larsen believed those statements at the time he made them.  If not, can you say "fraud"?

[112233]

naive or fraud, the result is the same

[Fred93]

I wonder if Larsen believed those statements at the time he made them.  If not, can you say "fraud"?

My guess is that he sincerely believed what he was saying, but he was extremely naive.  I think his experience at E-loan was at the origination end.  Having said that, there is something I don't understand.  Larsen was in charge.  The guy in charge allocates resources (ie money).  No money ever got allocated to the fraud / deadbeat problem.  (The tiny legal test was a shoestring operation.)  That implies that he didn't understand the problem even when it was in his face.  So my best explanation requires more than initial naivete.

[112233]

he probably wanted to clean his hands of prosper the same way he did with e-loan before the SHTF

no $300M offers this time though

[Ichabod]

Hi Fred,

Thanks for your blogging. I've been reading here for a long time, but I wanted to say I appreciate the work you've put in this.

[Senator]

Great job Fred.