Has anyone contacted California's Commissioner of Corporations Preston DuFauchard regarding his glowing review of Prosper.com (
http://money.cnn.com/2009/04/28/technology/hempel_prosper.fortune/?postversion=2009042811)? I nearly vomited when he is quoted as saying Prosper is an example of, "the kinds of innovative ideas that can help get credit in the hands of people who need it while instilling in our financial markets desperately needed openness and transparency."
Clearly he has not looked at the performance stats for all of Prosper's notes/loans/illegal securities. According to Prosper (
http://www.prosper.com/invest/performance.aspx), all loans/notes/investments/illegal securities that have seasoned for at least 1 year have a net Charge-Off rate of 21.16%. Chrage-off rates by credit score (for this same time period) are:
| 760-990 | 9.12% |
| 720-759 | 15.58% |
| 680-719 | 19.50% |
| 640-679 | 23.15% |
| 600-639 | 25.57% |
| 560-599 | 34.03% |
| 520-559 | 42.63% |
| No Credit | 52.83% |
Out of the remaining loans/notes/illegal securities/Identity Theft victims, only 88.37% are current. The rest are in some state of delinquency. Based on Prosper's abysmal collections results, we know that MOST of the non-current loans/notes/illegal securities will end up being "Charged Off". So, here is the summary of all notes/loans/investments/thieving son-of-a-bitch borrowers that are at least 12 months old:
| Status | Loan Count | % by Count | Loan Amount | % by Amount |
| Total | 22,212 | 100% | $140,604,546 | 100% |
| Paid In Full | 5,455 | 24.56% | $31,112,171 | 22.13% |
| Current | 9,986 | 44.96% | $31,453,876 | 22.37% |
| Late (<1 month) | 234 | 1.05% | $924,104 | 0.66% |
| Late (>1 month and <4 months) | 702 | 3.16% | $3,216,596 | 2.29% |
| Charged Off | 5,835 | 26.27% | $30,409,161 | 21.63% |
Speaking of "transparency", I am having trouble locating $43,488,638 in loans from the performance page. The "loan count" column adds up nicely to 22,212 total loans. But the total of the amount column comes up a tad short (roughly $43mil, give or take). The discrepancy is in the "Performance Data" area, which shows 10,220 active and billed loans <1 month late for $65mil, and 702 loans that are active and billed and 1+ months late, for a total of $5.4mill. The delinquency table accounts for all 10,922 loans by count, but can only account for $35.6mil of the amount. Where did I screw up my math???
Assuming that the ">1 month" late categories all end up being charged off (if someone has more accurate numbers, please feel free to link them and I will update my stats), it looks like a net charge-off rate of 29.43%. I shudder at the thought of 29.43% charge-offs being an "innovative" way to get "credit in the hands of people who need it". What is Preston DuFauchard thinking? Prosper may put credit in the hands of the people who need it, true. But it fails at putting credit in the hands of people that DESERVE it. Credit is earned. Just because you NEED the loan, doesn't mean it is a good idea to give you the money. Too many of us lenders/investors tried to "put credit in the hands of the people that needed it" and were burned. I don't know if we can blame Prosper's scoring system, their collections (or lack thereof), or a lack of enforcement of their notes. Frankly, I don't care HOW it failed or WHY it failed. I only care that it DID fail and somehow this fool in Sacremento thinks Prosper is a good idea and the cure to what ails the California economy???
Of course, these numbers are not new to any of you. So why put them here? Because I think that Preston DuFauchard should get a chance to rethink his position on Prosper. All these numbers and tables can easily be copied and pasted into an e-mail. And to whom should this e-mail be addressed? Why to Preston DuFauchard of course. I'm sure his e-mail address is listed on some government website somewhere, but just in case, you will also find it here:
pdufauch@corp.ca.gov. Feel free to send him the truth behind this "innovative" way of taking our hard earned money from our hands and into the hands "of people that need it", without any ability to enforce or protect our investment.
-E
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