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[Urbi_et_Orbi]

http://blog.prosper.com/2009/11/02/collections-%e2%80%93-hardship-arrangement-are-benefiting-lenders/

Since December, we have logged 327 of these plans. As of today, 251 of them are still active – that is an excellent retention rate. Right now this is one of our most effective tools to continuing payments for lenders.

Isn't that nice?

Now, please explain where in the LRA you found the right to make this modicifation to the terms in the LRA for these 327 loans - and also what you did to notify lenders on the impacted loans and how you obtained their permission to make this unilateral and retroactive change - considering "lenders" and not Prosper owned these 327 notes?

Just asking...

[Mark12547]

Nominated for The Lobby!

[TotoMMB]

Personally, this is my favorite line:

We do not over scrutinize the hardships documented.

Translation: Another wet band-aid to temporarily soothe the masses.

[ira01]

If they meet the promised payments, we can continue to report the account as “Current” with the Credit Bureaus. 

So Prosper fraudulently reports late payments as "current" -- isn't that nice.     Don't the CRAs require accurate reporting by creditors?  With any luck, however, some of these borrowers will be able to use their fraudulently reported clean credit reports to obtain a loan from LC and maybe pay off their Prosper loans with the proceeds.   

We are working on a major system project that will provide the tools that would allow us to extend this procedure to an “outreach” for all borrowers who exceed 15 DPD. 

So now Prosper is going to actively solicit the 16-30 day lates (most of whom historically have gotten current under the original loan terms) and offer up a reduced payment -- I'm sure many of the borrowers (even the ones who would have made full payments) will jump at the chance to make partial payments (while having their status misrepresented to the CRAs as "current" to boot).  So lenders will get LESS money than they otherwise would have.  Nice.   

[NewHorizon]

Nominated for The Lobby!

2nd

[bamalucky]

I don't remember any clause in the Lender Agreement that said Prosper has the right to alter loan terms.

[Mtnchick]

3rd for the lobby

At least we know 3.0 is just as poorly managed as 1.0 - and that they continue to things behind the lenders/investor's backs.

[Urbi_et_Orbi]

The way I read the blog post, the loans to which he is referring ARE 1.0 loans.  I would have much less of an issue with Prosper making modifications to 3.0 loans, since they own these notes.  They had no right to go tinkering like this with 1.0 loans without first re-purchasing them or obtaining lender approval.

[Mtnchick]

The way I read the blog post, the loans to which he is referring ARE 1.0 loans.  I would have much less of an issue with Prosper making modifications to 3.0 loans, since they own these notes.  They had no right to go tinkering like this with 1.0 loans without first re-purchasing them or obtaining lender approval.

Ah, so they can still say that NOW they are being "transparent"

[ira01]

I don't remember any clause in the Lender Agreement that said Prosper has the right to alter loan terms.

Actually, IIRC, it was just the opposite -- the LRA expressly PROHIBITED Prosper from altering loan terms.   

[112233]

This may be a good idea but it pisses me off when they act like this is their money and they can do whatever they want with it whenever they want, regardless of any agreements in place, and without any input or approval by the lender.

[ira01]

This may be a good idea but it pisses me off when they act like this is their money and they can do whatever they want with it whenever they want, regardless of any agreements in place, and without any input or approval by the lender.

+1.  Moreover, Prosper has proven itself to be undeserving of the trust required for it to be making such determinations on our behalf.  Even in this particular example, Prosper admitted in its blog post that it doesn't do much of anything to verify borrower's claims of hardship.  So any borrower who simply feels like paying less each month (without taking a credit report hit) can simply tell Prosper whatever made-up BS he/she wishes to.  Prosper said most hardship claims involved job loss -- so would it really be so difficult for Prosper to call the employer and verify?     It's like when we discovered that Prosper puts loans into BK status without verifying that the borrower actually filed BK, based only on the borrowers statement that he/she "planned" to file BK soon.     WTF?

[mothandrust]

Even at a reduced amount, if we can keep them paying, it is dollars flowing to lenders.

So if a borrower has $600 and a Prosper loan payment is $600 and a new TV costs $400, a borrower knows that he can get the TV buy calling up Prosper and paying $200 and that frees up $400.

Next month there might be some unforeseen expense like Christmas that necessitates a reduced payment.

All those $400 delayed payments add up until they become a big $3200 blob that will never be paid in full absent a big lottery win.

So what happens after 35 months and there's a huge balloon payment due?

[Mtnchick]

To date, this program has accounted for more than $225K in payments —some portion of which would not have received lenders.

That sentence doesn't even make sense.

[mothandrust]

The borrower who has $500 in the bank and $600 in bills starts calling his creditors:

The first he owes $200, but the creditor refuses to lower the amount and threatens to put a bad mark on his credit, so he writes the check for $200 and puts in the mail.

The second, Prosper, he owes $200, and Prosper quickly agrees to accept $100 and not say anything bad to the reporting agencies.

The third he owes $200, but since he has the money to pay he just mails the $200 check and doesn't bother calling.