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Author Topic: Shouldn't we have had an update from Doug Fuller by now?  (Read 19632 times)

Mtnchick

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #15 on: May 30, 2008, 09:19:42 pm »

Quote
Several people have expressed concern regarding how 121+ dpd loans are reported.   We are working to create a new loan status of “charged off”.  Loans in this status will not have their balance “zeroed” out (so that they can still accrue interest), but they will not be eligible to revert to a “current” or “delinquent” status even if a payment is received.

Thank goodness some common sense kicked in on this - it's actually some of the first preemptive "don't tick the lenders off" info I've seen from P-----r in quite some time.
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snake

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #16 on: May 30, 2008, 09:23:08 pm »

follow up question:

when will prosper change this page to reflect this new policy? As long as this page is written as is, doesn't changing the policy qualify as false or misleading advertising, if not outright breach of contract (although i'm sure the contract includes language giving them the right to alter said contract for any reason whatsoever)?

http://www.prosper.com/help/topics/borrower-payments_delinquency_fees.aspx

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112233

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #17 on: May 30, 2008, 09:27:28 pm »

if loans wind up in the charged-off status because the market value of these loans to JDBs is <= 1.5c/$1, then surely they can't remain at full face value on prosper's books, no?

also, they should reconsider offers from lenders like trav
« Last Edit: May 31, 2008, 12:26:29 am by 112233 »
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NewHorizon

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #18 on: May 30, 2008, 09:59:46 pm »

Me-thinks JDBs will never offer decent bids again if these efforts to collect charged off debts don't show some level of success.
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ira01

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #19 on: May 30, 2008, 10:07:41 pm »

This blog entry raises numerous questions in my mind:

UPdate tonight

Quote
Debt Sale Update
05/30/08 posted by Doug Fuller

Once bids with unacceptable contract conditions were eliminated

Like what?  "Unacceptable" from a lender's perspective, or only from prosper's perspective?

Quote
the highest bid we received was only 1.5 cents on the dollar.  To put this in context, “Out of Statute” paper - consumer debt that is time-barred by the statute of limitations, where the debt holder has not received a payment in 3 to 15 years - gets prices in the range of 0.5 to 0.75 cents.

The problem is that there is so much credit card paper available in the market, that no one is interested in a “novel” asset such as Prosper loans.  More than one bidder had told me that in this market, they’re only spending their money on consumer debt paper they’ve had experience with.

We believe the prudent course of business is to not sell at this time. 

I agree with this decision.  I know that will put me in a minority here.

Quote
Instead, we are going to consider the loans as charged off, and keep them and continue to try to collect them as charged off debts.  You will continue to own the loans as we apply post charge off collection techniques to these accounts.  We recognize that this is different than our normal process, but firmly believe that it will result in a higher return for our lenders.

One of the key arguments for selling bad debt quickly and without applying “post charge off” collection techniques, is that it reduces the value of accounts that don’t respond.  However, given the very low price we’re currently faced with, that’s not really a concern.

I think this is a good idea, but what, exactly, are "post charge off collection techniques"?  Do they include loan modifications?  Under the legal agreements, Prosper is not authorized to modify loan terms, but prosper is only a stickler for the legal agreements when it is seeking to enforce them against lenders, not when it would be the party bound.

Quote
Several people have expressed concern regarding how 121+ dpd loans are reported.   We are working to create a new loan status of “charged off”.  Loans in this status will not have their balance “zeroed” out (so that they can still accrue interest), but they will not be eligible to revert to a “current” or “delinquent” status even if a payment is received.

I have no idea what all this means (which, I suspect, may be the point).  Will "charged off" loans with their non-zeroed out balances continue to distort the data displayed in lenders' account pages and in the performance tab?  Will we see pending payments on these "charged off" loans on our account pages?  Or will Prosper distribute the money collected at some future date when it gets around to it (like it is apparently doing (or not doing) with the excess collections fees refunds it promised us months ago)?  And in the rare case that a charged off loan manages to get current (or even down to a <=3 months late status), why, exactly, shouldn't they be taken out of charged off status?  And what does it mean if they aren't?  A borrower could bring his/her loan current, and still have it sold off for pennies on the dollar at a JDB sale when the junk climate improves such that Prosper decides to have a sale again?

Someone needs to ask Doug these (and probably other) questions.
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Urbi_et_Orbi

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #20 on: May 31, 2008, 12:17:17 am »

This whole situation where Prosper is thrashing around in the dark, playing pin-the-tail-on-the-donkey with my money for their ill-conceived, leftist-guilt, wealth re-distribution scheme, is becoming rather tedious.
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xraider

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #21 on: May 31, 2008, 12:18:48 am »

Oops.  We didn't follow the LRA and loans have become valueless because we didn't sell timely.  Oh well.  Sorry.  We'll try again in a year or so. 
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ira01

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #22 on: May 31, 2008, 12:32:08 am »

This blog entry raises numerous questions in my mind:

UPdate tonight

Quote
Debt Sale Update
05/30/08 posted by Doug Fuller

Once bids with unacceptable contract conditions were eliminated

Like what?  "Unacceptable" from a lender's perspective, or only from prosper's perspective?

The more I think about this, the more I really want to know what these "unacceptable contract conditions" were.  For example, I wonder if one of them was that Prosper had to repurchase from the JDB any loans that turned out to be ID-theft?  Of course Prosper wouldn't want to agree to that, because not only would they have to repay the JDB the pennies on the dollar, they would have to repay the original lenders 100% on the dollar.
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112233

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #23 on: May 31, 2008, 12:34:08 am »

quick, which status is your loan under?
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Xenon481

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #24 on: May 31, 2008, 12:34:29 am »

This blog entry raises numerous questions in my mind:

UPdate tonight

Quote
Debt Sale Update
05/30/08 posted by Doug Fuller

Once bids with unacceptable contract conditions were eliminated

Like what?  "Unacceptable" from a lender's perspective, or only from prosper's perspective?

The more I think about this, the more I really want to know what these "unacceptable contract conditions" were.  For example, I wonder if one of them was that Prosper had to repurchase from the JDB any loans that turned out to be ID-theft?  Of course Prosper wouldn't want to agree to that, because not only would they have to repay the JDB the pennies on the dollar, they would have to repay the original lenders 100% on the dollar.

I would think that not agreeing to such a term would be an EXTREMELY actionable breach of Prosper's fiduciary duty to lenders.

112233

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #25 on: May 31, 2008, 12:36:58 am »

doesnt the LRA say we can wind up with zero for our defaulted loans? well, 1.5 cents is certainly better than that.

this isnt vegas prosper. stop chasing losses.
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Urbi_et_Orbi

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #26 on: May 31, 2008, 12:40:25 am »

Gotta know when to hold 'em and know when to fold 'em.

Another reminder that this isn't an "asset class" - it's gambling.
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Fred93

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #27 on: May 31, 2008, 02:08:06 pm »

What are the tax implications of a "Charged Off" loan? 

There will never be a direct answer that you will like.  The reason is this:  The words "charged off" don't appear in the tax code.  Therefore, from the tax code's point of view they have no meaning.

The tax code does contain a clear statment about what you can write off (in other words show a sale for $0 on your schedule D, and therefore take a short term capital loss).   They say you can do this for a bad debt when IT BECOMES WORTHLESS.  That's their word: WORTHLESS.

Is a "charged off" loan worthless?  You're gonna have to decide that for yourself.  I'm gonna say yes it is.

Quote
Can I deduct it on my taxes just like a sold/defaulted loan? 

Technically you don't mean deduct, you mean "Can I enter a captial loss?"  My answer is yes.  In fact, you can do this any time you like, no matter what category prosper has put some loan into.  The tax code doesn't speak about prosper's loan categories or their judgement!  If you believe a loan has become WORTHLESS then you can write it off.  However, you will want to have some sort of records showing some rational basis for doing this, because you might have to show it to an auditor some day, and get his concurrence.  My view is that if Prosper shows it as "charged off" that will be enough for the auditor, and he'll flip the page and go on to try to find something more juicy somewhere in the rest of your return. 

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If I can, how do I have to then later account for payments received in the next tax year?  What about if it ever actually sells in a different tax year from the charge off date?

This is a common problem, and it is described in the IRS booklet on capital gains & losses.  Basically after writing it off, if it turns out that the deadbeat coughs up some money you just write it back up with another entry on schedule D.

ira01

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #28 on: May 31, 2008, 02:45:53 pm »

What are the tax implications of a "Charged Off" loan? 

There will never be a direct answer that you will like.  The reason is this:  The words "charged off" don't appear in the tax code.  Therefore, from the tax code's point of view they have no meaning.

The tax code does contain a clear statment about what you can write off (in other words show a sale for $0 on your schedule D, and therefore take a short term capital loss).   They say you can do this for a bad debt when IT BECOMES WORTHLESS.  That's their word: WORTHLESS.

Is a "charged off" loan worthless?  You're gonna have to decide that for yourself.  I'm gonna say yes it is.

The problem is that Prosper has publicly stated that it has received an offer to purchase these loans for 1.5%.  That doesn't sound "worthless" to me.  Are you counting on the fact that these loans will show as "charged off" on the end-of-year statement, and that the IRS, presumably not an avid reader of Prosper's blog, won't know about the 1.5% offer?

Treating these loans as "worthless" will actually make them far more valuable to most lenders than if they had been sold at even the prices offered in April, since that will allow them to be treated as short-term capital losses at the lender's marginal rate (probably 25% or more for most lenders), rather than long-term losses at 15% (for most lenders).  On $7M of loans, that is a non-trivial difference (although in the overall scheme of the IRS's life, it is a small number).
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cowdog

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Re: Shouldn't we have had an update from Doug Fuller by now?
« Reply #29 on: June 02, 2008, 12:35:20 am »

Quote
Once bids with unacceptable contract conditions were eliminated the highest bid we received was only 1.5 cents on the dollar.  To put this in context, “Out of Statute” paper - consumer debt that is time-barred by the statute of limitations, where the debt holder has not received a payment in 3 to 15 years - gets prices in the range of 0.5 to 0.75 cents.

So I guess they will hold them as "charge offs" for a while longer, no payments will be made, and then they will be sold for .5 cents on the dollar instead of the 1.5 they could have had from this sale.

 ;D
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