Print

[Fred93]

Whoa!  Fred93 has updated his blog again.  This update contains new late loan charts, and a diatribe about the sad status of the Prosper.com legal test project.

http://fred93blog.blogspot.com/2009/08/prospercom-080109-late-loan-stats.html

[ira01]

As usual, great work Fred -- thanks!

The whole NAT situation (the test litigation) was a fiasco even by Prosper's standards.  It would sure be highly interesting to learn more details about that (which is no doubt why Prosper has refused to make any details available to lenders).  Considering that Prosper cherry-picked the 68 loans for this test, it should have been a no-brainer to win nearly all of them, and to collect substantial revenue for the lenders who opted in to the NAT.  Unfortunately, since Prosper apparently has no brains, it managed to completely screw this up.  

As most people here know, I have heard hundreds of collections cases in small claims court, brought by a variety of institutional creditors -- auto finance companies, retail finance companies, payday lenders, check cashing places, etc.  In virtually every case the defendant fails to appear, and in the vast majority of those cases the creditor wins a default judgment (and that's in small claims, where defendants do not file answers or other pleadings, no lawyers are allowed, and all a defendant has to do is show up at the hearing and tell his/her story).  It is mind-boggling that Prosper's results have apparently been so different (and since Prosper's cases were not filed in small claims court, answers ARE required from defendants, and most of the rules of civil procedure and evidence apply, so it is much more difficult for a defendant to represent him/herself).  I suppose the different results may be explained by the fact that in the cases I hear, it is the plaintiff/creditor's own money at stake.  In Prosper's case, any money it recovers (after paying its lawyers and various costs of the litigation project) goes to the lenders who owned the loans sued on.  So (as with pretty much everything else Prosper does), it really doesn't give a shit, since it isn't Prosper's money at stake (and we all know how "much" Prosper cares about us lenders).

[NewHorizon]

Falling below 60% of all loans current...

I can't recall that a year and a half ago or so, even the most cynical among us would have predicted such a number.  (Maybe others recall differently.)

[Senator]

YIKES! 44% appears on the Y-axis for the first time.

[Urbi_et_Orbi]

Fred's blog (8/1/09):
http://fred93blog.blogspot.com/2009/08/prospercom-080109-late-loan-stats.html

The basic fact about Prosper.com loans so far is that about 40% of the borrowers are not paying back the loans.

Chris Larsen to LA Times (8/2/09):
http://www.latimes.com/business/la-fi-perfin2-2009aug02,0,6483352.column

Since its inception in 2006, Prosper has registered a 19% default rate, Larsen acknowledged.

Isn't that a peculiar level of discrepancy?

[bankomatic]

Thank you for the loan updates Fred, your work is appreciated.

[bankomatic]

As usual, great work Fred -- thanks!

The whole NAT situation (the test litigation) was a fiasco even by Prosper's standards.  It would sure be highly interesting to learn more details about that (which is no doubt why Prosper has refused to make any details available to lenders).  Considering that Prosper cherry-picked the 68 loans for this test, it should have been a no-brainer to win nearly all of them, and to collect substantial revenue for the lenders who opted in to the NAT.  Unfortunately, since Prosper apparently has no brains, it managed to completely screw this up.  

As most people here know, I have heard hundreds of collections cases in small claims court, brought by a variety of institutional creditors -- auto finance companies, retail finance companies, payday lenders, check cashing places, etc.  In virtually every case the defendant fails to appear, and in the vast majority of those cases the creditor wins a default judgment (and that's in small claims, where defendants do not file answers or other pleadings, no lawyers are allowed, and all a defendant has to do is show up at the hearing and tell his/her story).  It is mind-boggling that Prosper's results have apparently been so different (and since Prosper's cases were not filed in small claims court, answers ARE required from defendants, and most of the rules of civil procedure and evidence apply, so it is much more difficult for a defendant to represent him/herself).  I suppose the different results may be explained by the fact that in the cases I hear, it is the plaintiff/creditor's own money at stake.  In Prosper's case, any money it recovers (after paying its lawyers and various costs of the litigation project) goes to the lenders who owned the loans sued on.  So (as with pretty much everything else Prosper does), it really doesn't give a shit, since it isn't Prosper's money at stake (and we all know how "much" Prosper cares about us lenders).

I was also surprised that they failed so badly.

[CleanRivers]

Thank you for the loan updates Fred, your work is appreciated.

+1

[ira01]

Fred's blog (8/1/09):
http://fred93blog.blogspot.com/2009/08/prospercom-080109-late-loan-stats.html

The basic fact about Prosper.com loans so far is that about 40% of the borrowers are not paying back the loans.

Chris Larsen to LA Times (8/2/09):
http://www.latimes.com/business/la-fi-perfin2-2009aug02,0,6483352.column

Since its inception in 2006, Prosper has registered a 19% default rate, Larsen acknowledged.

Isn't that a peculiar level of discrepancy?

Not given Prosper's highly distorting (and misleading) method of making such reports.  Assuming Larsen's number is technically correct, it is understated because he is only counting official "defaults" (or charge-offs), not the slew of loans that are 1, 2, or 3-months late as Fred counts.  As we all know, only about 15% of 1-month lates cure, and a tiny fraction of 2 and 3-month lates cure.  So by not counting those "defaults in all but name," Prosper gets to keep its stated default rate lower than actual.  In addition, Prosper counts all loans ever originated in the denominator of its calculation, even those too new to have defaulted (or even gone late).  Right now that doesn't matter much, since Prosper has been closed due to the SEC action, but as Prosper now originates more new loans, that will once again misleadingly distort Prosper's reported "default rate."

I'm sure that having to admit even an 18% default rate (as optomistically misleading as Prosper's calculation is) to the L.A. Times must have really pained Larsen.  The last such rate I remember Larsen claiming in an article was 6% IIRC.  And I remember when he was unbelievably claiming something like 2% in interviews, long after it was apparent that the real rate was going to be north of 20%.

[Tokyo Joe]

Gosh, the newer loans on the chart have a steeper curve than a lot of the older ones...

That can't be good...

[bamalucky]

Jan 2007 saw an enormous amount of idiot lenders show up.

I predicted Feb 2007 would be bad due to the huge jump in originations.

[Xenon481]

Gosh, the newer loans on the chart have a steeper curve than a lot of the older ones...

That can't be good...

And the disturbing part of that is that the newer loans are from after Prosper kept cutting out the lower ScoreX credit scores.

[Urbi_et_Orbi]

It will be interesting to see how Prosper 3.0 loans plot on this graph.

Does anyone think loans will age materially different?

[bamalucky]

It will be interesting to see how Prosper 3.0 loans plot on this graph.

Does anyone think loans will age materially different?

Faster late maybe 

[Mtnchick]

As always, thank you Fred!