I'm late to this dance, but I just wanted to point out that Prosper has taken down the response from their official blog. It's good to see that response cataloged here, simply because it was refuted in this thread.
Strangely, this is one of the few instances where Prospers interests were aligned with lenders interests. Due to their guarantee, Prosper is on the hook for the full amount of the loan just as lenders always are. How does this mesh with the Principle-Agent problem that Fred93 discussed?
http://www.prospers.org/blogs/media/blogs/Fred93/open-letter-number-2.pdf
