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Yes - At the same or higher levels as before

10 (13.9%)

Yes - But more cautiously

6 (8.3%)

No - I am waiting to see new default rates

3 (4.2%)

No - I won't bid again, cashing out as notes mature

47 (65.3%)

No - I won't bid again, selling notes and bailing out!

6 (8.3%)

Total Members Voted: 69

[Beerbud1]

No, why are you asking?

Just curious!

[kenL]

No, why are you asking?

Just curious!

No problem, I guess I should be more careful about making jokes that offend the majority of posters.

[God-Father]

No, why are you asking?

Just curious!

No problem, I guess I should be more careful about making jokes that offend the majority of posters.

Why?  As long as they are funny, keep them up.

[Fred93]

Remember, you aren't lending to Warren Buffett; Prosper.Com is lending to Warren Buffett, and you are lending to Prosper.Com--just like you might lend to Pets.Com or any other internet startup that burns through cash.

One thing that mitigates this argument is that as prosper makes more loans, they have more assets.  The value of these assets (loans) pretty much line up with the notes they issue, minus some loss which is going to occur, to which the lender (ie buyer of the notes) was exposed anyway.

Therefore, in a potential bankruptcy, the value of the loan assets would pretty much protect the note holders.

This is very different than a pets.com or other internet startup burning thru cash, but not building assets.

Therefore the risk is not quite as bad as you describe it. 

I'm sure  a bankruptcy would be a big mess, but its not like there are no assets.

[Fred93]

Of course the recession had a negative impact on prosper loan performance. If a person loses a job they will be less likely to pay back a loan, even a prosper loan.

"a negative impact"?   Well it is hard to imagine a positive impact.  Therefore it is easy to arm wave and make statements such as the above.  However, this is a supposition, not an evidence-based conclusion.

Looking at the data, one doesn't see evidence that the economic conditions drove prosper default rates.  That was my point.  Those (and there have been many) who excused prosper's bad performance because of the economy are full of baloney.  If it were so, you would see it in the data.

I've got my own theory about why this is not so obvious in the charts. I think prosper had been making improvements and trying to reduce the number of fraudulent borrowers throughout the 1.0 years, especially in 2007 when how bad things were was becoming undeniably apparent to them. They probably weren't disclosing such info because they didn't want to admit how many fraudulent borrowers there were,

I'll buy the notion that fraud (interpreting that word broadly) had a large effect on prosper loan performance.  Early prosper investors have tons of anecdotal evidence about fraud.

In summary I'm saying that the improvements that prosper made during the 1.0 years had a stronger effect on loan performance than the great recession did and this is why there SEEMS to be no correlation between prosper loan performance and the recession.

No question that many things were changing at once.  Difficult to track trends and/or understand their causes when nothing holds constant. 

For a prosper investor, this is an important area, but one that is difficult to know much about.  Prosper keeps the information secret.  We know they did really poorly in the past.  It is difficult to find the words to describe how poorly they did.  When lenders pointed out fraud, prosper attacked the lenders, etc.  Now they are doing much better.  What will they do tomorrow?  Just because they have been doing better recently, are those controls still in place this afternoon?  How would you know? 

[kenL]

I just want to clarify that I am not excusing prosper's bad performance on the economy. Loans were performing very badly long before the recession and I know that was the point of your blog post. Many thought your blog post was proving that the economy had no effect on prosper loan performance with which I completely disagree. That's why I did the arm waving.

[ira01]

http://www.linkedin.com/pub/casey-ketterling/4/512/392

Says he was: •Senior Software Engineer at Prosper Marketplace, Inc.

Who would have known?

Apparently the cat's got his tongue (or fingers):

Name:    locorooster
Posts:    6 (0.004 per day)
Position:    Newbie
Date Registered:    March 30, 2007, 07:03:40 pm
Last Active:    Today at 11:41:13 am

[mothandrust]

Therefore, in a potential bankruptcy, the value of the loan assets would pretty much protect the note holders.

This is very different than a pets.com or other internet startup burning thru cash, but not building assets.

If Prosper is originating $6M of loans per quarter but burning $2M of cash, doesn't each loan starts off with a liquidation value of around 67 cents on the dollar?

In its 9/30 10Q filing, Prosper admits to an an accumulated deficit of $48.1M, so conflagrating their "Borrower Loans Receivable At Fair Value" of $18M would only take a few years, especially when they are hiring bankruptcy lawyers and eventually a trustee to disburse the assets.

I have a bond that would have matured 2003 in a company that filed chapter 11 in 2001, and every year I get a small principal payment.  The bankruptcy trustee is paid $200K/year, so someone has set him up with a nice little job.

[ira01]

Therefore, in a potential bankruptcy, the value of the loan assets would pretty much protect the note holders.

This is very different than a pets.com or other internet startup burning thru cash, but not building assets.

If Prosper is originating $6M of loans per quarter but burning $2M of cash, doesn't each loan starts off with a liquidation value of around 67 cents on the dollar?

No.

In its 9/30 10Q filing, Prosper admits to an an accumulated deficit of $48.1M, so conflagrating their "Borrower Loans Receivable At Fair Value" of $18M would only take a few years, especially when they are hiring bankruptcy lawyers and eventually a trustee to disburse the assets.

That deficit was funded with VC money, which the VC have no claim on Prosper to recoup.  Put another way, the VC money makes them shareholders, not creditors.  If Prosper goes belly-up, only creditors share Prosper's assets.  Prosper's creditors will include the "lenders" (the largest group of creditors by far), any unpaid vendors or employees, and any other creditors (such as when Prosper borrowed a million or whatever as bridge financing).  

[Urbi_et_Orbi]

I, for one, missed the occasional snide anonymous insults lobbed into these threads by Prosper employees and members of their families.  After years of silence, I hope locorooster's ramblings were not just an isolated drive-by insult. Cowdog deserves better.

[mothandrust]

If Prosper goes belly-up, only creditors share Prosper's assets.  Prosper's creditors will include the "lenders" (the largest group of creditors by far), any unpaid vendors or employees, and any other creditors (such as when Prosper borrowed a million or whatever as bridge financing). 

Including $300K on their 8% loan to buy the Prosper.Com domain name.

I know the VC equity investors have no claim on Prosper's assets, but going forward, where is the $2M bundle of quarterly firewood going to come from?

If Prosper can sell $2M worth of equity each quarter, then OK, no problem.

But if they can't, Prosper will have to issue bonds (which would have an equal or higher claim than the Prosper "lenders") or borrow it from a bank (which would have a higher claim).

[Fred93]

Therefore, in a potential bankruptcy, the value of the loan assets would pretty much protect the note holders.

This is very different than a pets.com or other internet startup burning thru cash, but not building assets.

If Prosper is originating $6M of loans per quarter but burning $2M of cash, doesn't each loan starts off with a liquidation value of around 67 cents on the dollar?

Well, you have a point.  I always assumed the rate of loan generation would ramp back up, so that the total $ of loans would be much larger than the total money from VCs.  However, it ain't rampin' very fast.

There are also a host of technical details here, such as whether the investment from VCs would be treated as debt or equity in a bankruptcy.  I'm pretty sure it is structured as convertible notes.

[kenL]

Total lender assets right now are about $32 million.

From a new page at lendstats http://www.lendstats.com/loansearch/loanfilter.php

[bluestar148]

Oh my what a mess.

[havastat]

Indeed.