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[Cushie]

http://www.denverpost.com/business/ci_10990022

Relevant part:

Easy to get burned

Unfortunately, good borrowers aren't as easily found as the risky ones. Just ask Braun Mincher, an entrepreneur in Fort Collins who waded into the P2P pool last year.

With a $10,000 pot to dole, Mincher registered at Prosper.com, searched the profiles and pitched in on 76 loans.

Because he wanted a high return, Mincher turned to the high-risk sector, where borrowers with poor credit histories had believable stories about turning their life around.

Most didn't.

To date, 44 of the loans have been written off to default, Mincher said, and just eight are paid off. His losses top 15 percent, and of the remaining 24 loans, just 14 are current.

"I tried to pick people who said they were changing their ways," said Mincher, who also owns a piece of a community bank and has written a book about personal finance.

"I love the P2P concept; it's a great model of the lender vetting the borrower themselves," he said. "But it's been less than a great experience."

[onthefence]

Lobby.

[beerbud1]

I second it for the lobby

[bamalucky]

The best advice of all comes from the one comment

[Mark12547]

Though more than 60 percent of the general population has a credit score over 680, just 40 percent of the borrowers at Prosper.com fall into that group, according to Celent.

I think that confirms that Prosper experiences "adverse selection" among the borrowing members.

[Shenandoah]

http://www.lendingstats.com/lenders/CTI-Lending

[bamalucky]

http://www.lendingstats.com/lenders/CTI-Lending

Thats pretty stupid lending.

[Mtnchick]

Some enterprising mag needs to do a report on the top 10 lenders.

[Cushie]

http://www.lendingstats.com/lenders/CTI-Lending

Thats pretty stupid lending.

Ooh, I remember that guy.  I was always amazed at how bad he was at picking loans.

[msava]

Easy for us to say how bad a picker one is now. Back in the beginning, many of us really just believed in the goodness of people. I really believed the stories people wrote. In fact, I still believe some of the people were honest, but just didn't have the resources to make the payments.

Good example, a loan I personally co-sponsored for a dear friend, is current but I found out the lady really is struggling to make the payments. She is part of a group that we have to discuss books. Once a month we meet at a different members house.  Light refreshments are served, provided by the host house. This week she made the most incredible dish out of spam, frozen peas and (I swear) Ramen noodles. Everyone was asking for the recipe. Amazing what onions, garlic and spices can do to ordinary food. 

This lady will probably eat cat food before she let her loan default. Not many people are willing to sacrifice personal comfort to honor a debt, especially to people they don't know. At the meeting it was suggested we do pot luck or no refreshments since our little group is growing. The suggestion was overwhelmingly voted down.

Perhaps we should have been asking borrowers, what will they give up to make their loan payments.

[Mark12547]

http://www.lendingstats.com/lenders/CTI-Lending

Thats pretty stupid lending.

Ooh, I remember that guy.  I was always amazed at how bad he was at picking loans.

I still remember back in the beginning when a couple of people on the official forums were saying that HR's were the sweet spot for picking loans. My recollection was that it wasn't until summer of 2006 before someone who screen-scraped group loan screens falsified that statement, saying that the data looked two to three times worse than the Experian data on annualized default rates on "all bank card products." Later it was "vetted HR borrowers" that were the sweet spot, which again proved to be false. CTI-Lending did the most bidding the three months before the Performance Page on Prosper.com showed an "estimated performance".

I think most of us were rather stupid, thinking that, with less information (summaries from one credit report--not even seeing an actual credit report, let alone information from all three CRAs), and, for most of us, no experience, that we could beat banks at their own game. Worse, we were doing this with a new segment of the debt market that lacked any kind of meaningful data, with loans that banks had pretty much abandoned (banks seem much eager to hand out credit cards than to issue signature loans).

I forget when the pninen charts started, but those should have been a wake-up call to let lenders know that the vast majority of lenders are making stupid loans. Alas, some had sunk substantial sums into loans before realizing the risks were high.

The rule of thumb still applies: if the returns are greater than expected, look for one of two things: unrecognized risk, or hidden fraud. In Prosper's case, I think it was unrecognized risk that many borrowers would be defaulting (and outright fraud by some borrowers).

[Mtnchick]

Don't forget, we also believed Prosper's claims that they were going to have an active collections department. Even the Great Doug Fuller couldn't put a dent in that problem.

[onthefence]

I think most of us were rather stupid, thinking that, with less information (summaries from one credit report--not even seeing an actual credit report, let alone information from all three CRAs), and, for most of us, no experience, that we could beat banks at their own game. Worse, we were doing this with a new segment of the debt market that lacked any kind of meaningful data, with loans that banks had pretty much abandoned (banks seem much eager to hand out credit cards than to issue signature loans).

People believed the Experian historical default risk numbers.  Plus, the historical Experian default numbers were based off of loans that banks would make.  The 2ndary problem is lenders had no clue who banks would not lend to & with what criteria.  20% DTI ratio was a known max.  But I think that was the limit of the knowledge provided by prosper back then.

I personally think the most foolish notion was that there were all these great deals that would disappear once the general lending population figured it out so we had to jump on them now.  From my perspective, if these market segments were good values or not was yet to be proven.  Additionally, what good would it do to tie up your funds in 3 year prosper loans if the future loan prospects were lousy.

[BrassKnuckles]

prosper sucks