Well congratulations Prosper on getting something out the door again.
The 640 cap is a wise decision to protect lenders from their own foolishness.
I'm not sure why you dropped Ds. The default rate is very close to Cs. It's merely an issue of charging a sufficiently high interest rate to account for the default rate.
I'm not sure how well the bank issues loans will fair. We might think they could do a better job of assessing loans, but that brings up the whole question of how toxic mortgages started. Banks were churning out bad loans & reselling them eliminating their own risk. How will this be any different?
I hope Prosper makes data available so that we can track the performance of certain bank originators over time. Banks that originate loans with lower default rates for a given credit grade should expect to be rewarded by the lending community with lower bid interest rates. Those that suck, will have to be charged more.
It might also be nice for banks to provide profiles on their origination process. Does a certain bank verify the employment status & income of every borrower? That would be worth something. Or do they merely verify 25% (we know how well that has worked out).
