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[God-Father]

I was in it for the money.

[havastat]

Agree. It was never anything remotely like the Kiva situations -- even if those figures are accurate.

[Senator]

I think you are really lying to yourself if you think you do somebody a favor when you lend them money at 8%-35% interest. I have both borrowed and lent from and to friends and family in my life and every single one of those loans were at 0%. Prosper loans were never anything other than business transactions even though they might have been percieved differently by some.

Shouldn't we expect borrowers to make good on these business transactions?

[laxa]

Shouldn't we expect borrowers to make good on these business transactions?

Well, if we look at each individual borrower then yes. But when you look at all the borrowers as a group you are already charging the ones who pay extra interest to make up for the ones who don't pay.

If every borrower always paid back then shouldn't the interest rates be at or near CD rates?

[uioped1]

I couldn't comment on the dailyfinance site, so I'll post it here...  Thanks for linking the article.

Alex Salkever,

I find your comparison between Prosper and the banking crisis to be unsupported in your article.  Specifically, the social ties that Prosper _did_ manage to allow -- specific knowledge of individual borrowers and their circumstances prior to investment -- was precisely that which you decry for not being present in mortgage-backed bonds.  This is not to say that there aren't comparisons to be drawn between the personal crisis of your lending portfolio and the greater banking crisis.  The first major comparison is that, contrary to what we were told when we were lending, these were largely stated-income loans.  Prosper did little if anything to verify information outside of a credit report.  While I cannot prove it (due to the restrictions you mention) I suspect that there was fairly significant fraud in borrower listings.  The second major similarity I saw was greed overshadowing common sense.  When you compare the listings on Prosper to those on Kiva, You neglected to compare the interest rates charged.  I fail to see how anyone can consider charging 30% (or even more!) on a loan to be "helping [their] fellow man" and yet in the higher-risk areas, these rates were common.  I wonder, had lower rates been charged, whether fewer of these loans would have ended up in default.  When bankers chased after impossible returns, it lead to the banking collapse.  When lenders on Prosper did the same, inevitably they saw their anticipated windfall evaporate.

[Senator]

I wonder, had lower rates been charged, whether fewer of these loans would have ended up in default. 

That experiment was tried and it failed.  Look up "Muleshoes".

[mothandrust]

Prosper has incrementally been homogenizing the listings to make them as anti-social as possible...

Removal of GL fees (effectively closing groups that "vetted" loans, since few will work for free)
Reduction of personal pictures from 4, to 1, now completely eliminated (only "stock" photos now)
Default to not show borrower's City (is the loan for real estate in Frisco or Fresno?)
Deletion of forums where borrowers and lenders could discuss listings
Portfolio Plans to encourage "blind" bidding on listings
Encouraging borrowers to leave listing text blank
Scrubbing PII on listings when the borrower voluntarily provided it
Removal of community payment option
No link to Groups on Home Page (next step: removal)

...and many other actions and inactions that we've forgotten about.

[Senator]

Default to not show borrower's City (is the loan for real estate in Frisco or Fresno?)

...and many other actions and inactions that we've forgotten about.

When Prosper removed the borrowers city the exposed the lender's state.  It used to be hidden.  When I asked my state to revert back to hidden, Prosper responded with silence.

[kenL]

Encouraging borrowers to leave listing text blank

How do they encourage borrowers to leave the description blank?

[God-Father]

For a while they were making some sort of quick listing where they didn't have to enter anything.  Prosper just put in some canned vebage.

[mothandrust]

IIRC if you met some numeric threshold while preparing your listing the system would explicitly say that writing a description was optional.  Was it just for AA's?