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[nonattender]

nonattender hasn't bid in almost 2 years. That pretty much says all I need to hear on how much faith he has in Prosper. Even Anton has bid

My state has, effectively, decided that none of its residents are competent enough to transact on any
peer to peer lending markets.  Of course, I also live in a state which won't let me buy wine on Sundays.

ETA:  Though they have no qualms about selling me a lottery ticket instead of the wine I want to drink.

-t

[bamalucky]

I agree with your state. You must have participated in a poll.

[christoofar215]

My state is still upset that the little piece of sh** state next door (Delaware) can export their lax-usury laws to this state, which has tight usury laws.

They made up for that by making the state more borrower-friendly, like Texas did.

[ira01]

My state is still upset that the little piece of sh** state next door (Delaware) can export their lax-usury laws to this state, which has tight usury laws.

I agree -- and that is exactly what happens when you let businesses choose the laws they want to be governed by despite operating nationally.  Which is exactly why health insurers shouldn't be allowed to sell policies nationally while governed only by their own state laws -- one or two states will "win" the "race to the bottom" by passing laws that rape consumers to the benefit of insurers (like Delware and especially South Dakota and the credit card companies), and all the health insurers will relocate there so they can maximize profits at the expense of their policy-holders. 

[The_Cat]

After registration, lenders were subject to the same idiosyncratic risks on a per borrower basis, except that now, due to the corporate structure necessitated by the labeling of the notes as "securities", the lenders are subject to a NEW risk, that of operational risk of the p2p lending company itself, as "notes" are now a general obligation of the company, and not a general obligation of the individual borrowers...

I believe the operational risk has always been there because Prosper has always asserted they "owned" the notes.

Having the SEC as the regulatory oversight body doesn't improve the risk profile of prosper notes as an investment but neither does it make it any worse.

Having a regulatory body which can slap Prosper for unethical behaivor such as advertising bogus returns is a net positive.

I read your original post as asserting the *new* operational risk is introducing a significant new factor for investor consideration. If that is not the case then my apologies for calling BS.

[ira01]

After registration, lenders were subject to the same idiosyncratic risks on a per borrower basis, except that now, due to the corporate structure necessitated by the labeling of the notes as "securities", the lenders are subject to a NEW risk, that of operational risk of the p2p lending company itself, as "notes" are now a general obligation of the company, and not a general obligation of the individual borrowers...

The operational risk has always been there because Prosper has always asserted they "owned" the notes.

That's not true.  The LRA in effect when I joined Prosper, for example, clearly demonstrates this:

Purchase and Sale of Notes. Prosper agrees to sell and you agree to purchase, from time to time, without recourse, all Notes resulting from the matching of your bids with listings on the Prosper marketplace. Prosper agrees that promptly upon funding loans evidenced by such Notes, Prosper will sell, transfer, assign, set over and convey to you, and you will purchase, all of Prosper's right, title and interest in and to the Notes; provided, however, that Prosper will retain the Servicing Rights with respect to the loans. Although Prosper will retain the Servicing Rights to all loans, you will hold title to, and ownership of, the Notes until the Notes are paid in full or sold as provided in Section 6.f below.

[The_Cat]

That's not the version I recall. I always remember Prosper as the owner and service agent. Our bid was an offer to purchase an incremental portion of the right to receive a portion of the payments. Since I was not the owner that prevented me from taking action to collect and Prosper retained the right to sell the loan to a collections agency. I never was convinced that the loans wouldn't be considered a possible asset in a BK.

I believe the operational risk has always been there. These are and, I believe, always have been a sort of pass through security. I don't think the change has introduced a significant change to the risk profile.

[The_Cat]

That's not true.  The LRA in effect when I joined Prosper, for example, clearly demonstrates this:

Purchase and Sale of Notes. Prosper agrees to sell and you agree to purchase, from time to time, without recourse, all Notes resulting from the matching of your bids with listings on the Prosper marketplace. Prosper agrees that promptly upon funding loans evidenced by such Notes, Prosper will sell, transfer, assign, set over and convey to you, and you will purchase, all of Prosper's right, title and interest in and to the Notes; provided, however, that Prosper will retain the Servicing Rights with respect to the loans. Although Prosper will retain the Servicing Rights to all loans, you will hold title to, and ownership of, the Notes until the Notes are paid in full or sold as provided in Section 6.f below.

IRA- I don't have the LRA from when I joined and I'm almosty past the point of caring. I do have a question though.

Assume I am a general creditor of Prosper and Prosper had gone BK under the terms of this LRA. If I hire you as my attorney to collect on my behalf what arguments are you going to use to attempt to attach the Prosper loans. How would your theory change under the new LRA and would you be more successful under the new LRA?

[ira01]

That's not true.  The LRA in effect when I joined Prosper, for example, clearly demonstrates this:

Purchase and Sale of Notes. Prosper agrees to sell and you agree to purchase, from time to time, without recourse, all Notes resulting from the matching of your bids with listings on the Prosper marketplace. Prosper agrees that promptly upon funding loans evidenced by such Notes, Prosper will sell, transfer, assign, set over and convey to you, and you will purchase, all of Prosper's right, title and interest in and to the Notes; provided, however, that Prosper will retain the Servicing Rights with respect to the loans. Although Prosper will retain the Servicing Rights to all loans, you will hold title to, and ownership of, the Notes until the Notes are paid in full or sold as provided in Section 6.f below.

IRA- I don't have the LRA from when I joined and I'm almosty past the point of caring. I do have a question though.

Assume I am a general creditor of Prosper and Prosper had gone BK under the terms of this LRA. If I hire you as my attorney to collect on my behalf what arguments are you going to use to attempt to attach the Prosper loans. How would your theory change under the new LRA and would you be more successful under the new LRA?

Although I haven't researched the issue (nor do I care to), my gut feeling is that Prosper creditors would be unsuccessful in attempting to reach the Prosper 1.0 loans.  While TINLA, I believe that the Prosper 1.0 loans are clearly the property of the lenders, not Prosper -- Prosper was simply the irrevocable servicing agent for those lenders.  While it is true that lenders agreed to forgo some rights they would otherwise possess as owners of the loans (such as conducting their own collections), I do not believe that impacts their ownership status of the loans.  For example, if you own a house subject to a homeowner's association, the CC&Rs strip you of many of the rights you would normally possess with respect to your house -- yet that doesn't alter the fact that you still own the house.  Similarly, if you own stock subject to a shareholder agreement, you still own the stock even though you have given up some of the rights you would otherwise possess.

I think a general creditor would be much more likely to prevail with respect to Prosper 3.0 loans, which are expressly the property of Prosper, not the "lenders."  I'm not sure what effect Prosper's machinations with respect to the security interest supposedly given to the indenture trustee might have -- and it seems like Prosper itself isn't sure either.  But that doubt presumably means that a creditor would have at least a reasonable chance of reaching the Prosper 3.0 loans; in contrast to almost no chance of reaching the Prosper 1.0 loans.  But again, TINLA.