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[NewHorizon]

Just thought I'd throw this out there as it has to do with unsecured debt (ya know - kinda like Prosper )...
Credit card defaults alarmingly high

Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.
...
"Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa," said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. "We're starting to see leaks now."

Happy Holidays 

ETA: I just now saw this posted in the verified lenders area.  You guys have things pretty well covered as usual.  Ah well, me-thinks this info is appropriate here too...

[caliostro]

Notice the Zopa video interview featured to the right of the column? I found its placement in this article to be funny.

[Tokyo Joe]

One thing I will be grateful to Prosper for is the way it made me learn to see the larger picture...

So roll back the clock a couple of years:

Lenders are stuffing the most unfit buyers ever into the most overpriced homes ever.
The more fit existing homeowners start chubbing up on HELOCs, buying stuff.
Speculators continue to push prices up, and unfitter and unfitter buyers keep getting worse and worse deals.

*pop*

So the unfit buyers start defaulting.  Credit tightens, and less are able to get into new houses.
Houses begin to drop in value, the HELOCs start compounding loss in equity, and ARMs start kicking in.

*crash*

The banks and brokerages and anyone who does business with them take a bath on the resulting implosion...

So now that the HELOC fad has vanished, consumers are suddenly waking up to more debt than they ever imagined a couple of years ago.
With nowhere else to turn, they head for the credit cards.  Their debt grows, as does the price they pay for it...


Thought the wrost was over?  Wait until the credit card companies start bleeding red and jacking rates...  The new FICO 08 is a step in the right direction, but it's too late, because the damage has already been done...


Meanwhile, in other news, Prosper.com has lifted the longstanding rule of "one customer, one loan" and has gone so far sending emails to every borrower, good or bad, they ever had, encouraging them to borrow again, "up to $25K", as if that were their personal credit limit, or something...

Even if I had no grievences with Prosper, I wouldn't touch consumer loans right now, especially to those with any kind of significant debt (and as little as $4K debt can be very significant in some households).  Stay away from bank stocks too, you haven't heard the last...  Good thing there are people like Arabs and Chinese to bail their asses out

Merry Christmas everyone!  Treat yourself and buy a gift that keeps on giving into the future: buy off a portion of your debt by making an extra payment this month...   

[lenderguy]

With the new FICO 08 putting increasing weight on utilization, is that a tacit admission that ScoreX actually did something right?  We were all bemusing how much weight ScoreX puts on utilization and yet still commenting how much better FICO is than ScoreX.

BTW, that raises an excellent point... very very few of us have the exposure to as many FICO score reports as we do ScoreX.  Why then, do we assume that FICO is *so* much better?  We might say "because the banks use FICO."  Well, did FICO prevent a bunch of foreclosures and losses for the banks with this subprime mess?  Methinks not.

My only point is that I am not certain we would have made statistically better lending decisions with a FICO score instead of ScoreX.

[Fred93]

Meanwhile, in other news, Prosper.com has lifted the longstanding rule of "one customer, one loan" and has gone so far sending emails to every borrower, good or bad, they ever had, encouraging them to borrow again, "up to $25K", as if that were their personal credit limit, or something...

That letter was very poorly written.  It really did sound like it was telling every borrower that $25k was their personal credit limit.  Of course what it intended to convey was simply the loan size limit imposed by prosper, but that's not how it came across.  It appeared to encourage many HR lenders to borrow an amount 10 times what they can afford.

[red12049]

With the new FICO 08 putting increasing weight on utilization, is that a tacit admission that ScoreX actually did something right?  We were all bemusing how much weight ScoreX puts on utilization and yet still commenting how much better FICO is than ScoreX.

BTW, that raises an excellent point... very very few of us have the exposure to as many FICO score reports as we do ScoreX.  Why then, do we assume that FICO is *so* much better?  We might say "because the banks use FICO."  Well, did FICO prevent a bunch of foreclosures and losses for the banks with this subprime mess?  Methinks not.

My only point is that I am not certain we would have made statistically better lending decisions with a FICO score instead of ScoreX.

How could FICO "prevent" the subprime mess?  Humans made the decisions to lend to subprimes, not FICO.  IN most cases FICO clearly identified subprime borrowers; humans made the final lending decision, usually due to greed.

R

[Mtnchick]

Just so you guys know in advance, if I am ever diagnosed with a terminal illness, I am taking my friends and family and ramping the hell out of my CCs before I go But honestly, I have enough in real estate that would cover them all when sold, but it sure is going to be fun. Then again, I could end up like that guy in England who got the wrong diagnoses, spent all his money then found out they had the wrong paperwork for him and he was fine, lol.

[Tokyo Joe]

How could FICO "prevent" the subprime mess?  Humans made the decisions to lend to subprimes, not FICO.  IN most cases FICO clearly identified subprime borrowers; humans made the final lending decision, usually due to greed.

R

It doesn't fix the subprime mortgage meltdown, but it might stave off the credit card meltdown, by rewarding those worthy of reward, and denying those who need to get their ships in order first.

[red12049]

How could FICO "prevent" the subprime mess?  Humans made the decisions to lend to subprimes, not FICO.  IN most cases FICO clearly identified subprime borrowers; humans made the final lending decision, usually due to greed.

R

It doesn't fix the subprime mortgage meltdown, but it might stave off the credit card meltdown, by rewarding those worthy of reward, and denying those who need to get their ships in order first.

TJ,

My point above was that FICO doesn't make the decisions, humans or computers do.  FICO presents a rating, nothing more.  Someone makes a decision based on that raing, along with other criteria.  FICO can do nothing to prevent poor decision making.

R

[lenderguy]

red,

The point I was trying to make is that lenders here are alleging that a possibly flawed scoring algorithm resulted in them making poor lending decisions.  More specifically, I was trying to illustrate that even with what is considered a better algorithm, that bad lending decisions can still be made.

Thank you for clarifying my point, as what you wrote is exactly what I was trying to say.

[caliostro]

poofus

[Cheerful_Lender]

And this is how the banks respond. If only Prosper lenders had similar tools at their disposal!

Notice the "write off" (or default) rate is $920B/$961M* = ~0.1%
Slightly better than Prosper.  They don't say quite how long a period this covers so it probably isn't a yearly rate... but no matter how many times you multiply that 0.1%, it's nothing like Prosper.
*$920B is the Fed's estimation of credit card debt.  $961M is amount 90+ days late.

[Staneslav]

a

[nonattender]

My only point is that I am not certain we would have made statistically better lending decisions with a FICO score instead of ScoreX.

How could FICO "prevent" the subprime mess?  Humans made the decisions to lend to subprimes, not FICO.  IN most cases FICO clearly identified subprime borrowers; humans made the final lending decision, usually due to greed.[/quote]

Word.

-t

[bamalucky]

Na is trying to bury prosper relevant topics