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[112233]

( BW)(CA-PROSPER) Prosper's People-to-People Lending Market Survey -
Dec 2007

    Business Editors

    SAN FRANCISCO--(BUSINESS WIRE)--Jan. 15, 2008--Prosper
(www.prosper.com), America's largest people-to-people lending
marketplace, today released the results of its December 2007
People-to-People Lending Market Survey.

    In this month's market commentary, Prosper Chief Executive Officer
and co-founder, Chris Larsen, reviews 2007 and assesses what the
imminent recession and ongoing credit crunch means for
people-to-people lending.

    In February, Prosper's People-to-People Lending Market Survey will
resume its normal release schedule, publishing on the second Tuesday
of every month. To register to automatically receive the survey, send
an email with "SUBSCRIBE" in the subject line to:
p2plendingmarketsurvey@prosper.com.

December 2007 Prosper People-to-People Lending Market Survey

Membership and Loan Volume Statistics

                       -----------------------------------------------
                       December December   2007      2006      Since
                         2007     2006   Full Year Full Year Inception
----------------------------------------------------------------------
New Members             31,620   18,251   400,361   137,545   538,128
----------------------------------------------------------------------
Funded Loans            $6.2     $4.5     $80.9     $28.1     $109.1
                        million  million  million   million   million
----------------------------------------------------------------------
Average Loan Size       $7,268   $4,638   $7,053    $4,765    $6,272
----------------------------------------------------------------------
Daily Average Number
of Borrower Listings    2,924    1,723     2,348     1,037     1,562
----------------------------------------------------------------------


Estimated Annual Return on Prosper Select Index

                              ----------------------
                                  December 2007
----------------------------------------------------
Prosper Select Index                  8.34%
----------------------------------------------------
           Prime Select Index         8.46%
----------------------------------------------------
      Near Prime Select Index         8.43%
----------------------------------------------------
       Sub Prime Select Index         5.59%
----------------------------------------------------


Average Borrower Rates on Prosper Select Loans

                ------------------------------------------------------
                                             2007     2006
                December November December Year-to- Year-to-   Since
                  2007     2007     2006     Date     Date   Inception
----------------------------------------------------------------------
Prime Select
 Loans           9.80%    10.22%   9.21%    9.98%    10.39%   10.08%
----------------------------------------------------------------------
Near Prime
 Select Loans    16.07%   15.90%   16.50%   16.01%   16.41%   16.11%
----------------------------------------------------------------------
Sub Prime
 Select Loans    32.99%   21.63%   23.86%   23.42%   25.01%   23.91%
----------------------------------------------------------------------


Mix of Funded Borrowers

                 -----------------------------------------------------
                 December December     2007         2006       Since
                   2007     2006   Year-to-Date Year-to-Date Inception
----------------------------------------------------------------------
Prime              43%      25%        32%          25%         30%
----------------------------------------------------------------------
Near Prime         52%      44%        57%          49%         55%
----------------------------------------------------------------------
Sub Prime           5%      31%        11%          26%         15%
----------------------------------------------------------------------


    Noteworthy

    The Official Prosper Blog (http://blog.prosper.com/) was honored
by the 2007 Performancing Readers Choice Award for "Best Use of a
Corporate Blog." (http://performancing.com/ performancing-awards/performancing-blog-awards-2007-winners). (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)

    Market Commentary by Chris Larsen, Chief Executive Officer and
Co-founder of Prosper

    2007 proved to be a pivotal year for US markets as we abruptly
transitioned from optimism to fear of imminent recession. Who could
have predicted at the start of 2007 that the word "subprime" would be
voted the word of the year?

    At Prosper, we also saw a dramatic switch in the prime versus
subprime market with subprime declining from over 25% in 2006 to
barely 5% currently. This change reflects both a changing external
market as well as a maturing of the Prosper marketplace.

    Obviously the subprime meltdown exposed much more risk in the
subprime market in 2007 compared with a year earlier. Prosper's
performance data bore this out and has clearly moved people to safer
ground or to fund those borrowers with a clear social capital benefit.

    The silver lining has been more opportunity in the prime and near
prime segments. As the credit crunch has unfolded, many traditional
lenders have dramatically tightened or eliminated credit to even their
best customers. For example, home equity, which until recently was
referred to as Americans' ATM, has been substantially limited by
falling real estate prices and mortgage industry bankruptcies. Credit
card offers have also been substantially reduced as defaults have
spiked nearly 20%. Thus, while the environment was tougher in 2007,
there is also much less competition for the best customers. This bodes
well for people-to-people lending which can take up the slack from the
seized-up capital markets.

    The key focus for loan buyers will be choosing borrowers smartly
and pricing adequately for risk. Prosper's additions of
Prosper-specific market risk data and Portfolio Plans were both major
milestones in giving bidders the information they need to choose
wisely. For borrowers, pricing their listings adequately, telling and
explaining their story honestly, and involving friends and family to
bid as a measure of social capital are great ways to increase the
success of their auctions.

    Definitions

    2007 Full Year: January 1, 2007 through December 31, 2007.

    2006 Full Year: January 1, 2006 through December 31, 2006.

    Since Inception: November 1, 2005 through December 31, 2007.
Prosper's by invitation only "friends and family" launch began on
November 1, 2005 and Prosper launched to the general public on
February 13, 2006.

    Prosper Select Index: The Prosper Select Index return is the
estimated average annual return on principal, based on actual
delinquency performance to date. The Prosper Select Index includes AA
- E credit grade loans for borrowers whose credit reports at the time
of application indicated zero current delinquencies, three or fewer
credit inquiries, and a debt-to-income ratio of 40 percent or less.
The annual return period reflects loans originated in the twelve month
period ending one month prior to the observation date of December 31,
2007. Prime Select includes AA and A credit grade loans (credit scores
of 720+). Near Prime Select includes B, C, D credit grade loans
(credit scores between 600 and 719). Sub Prime Select includes E
credit grade loans (credit scores between 560 and 599).

    Average Borrower Rates: Average Borrower Rates are the weighted
average borrower rates on Prosper Select Index loans with loan amounts
between $5,000 and $10,000. Rates shown are interest rates, not annual
percentage rates.

    Mix of Funded Borrowers: Prime includes AA and A credit grade
loans (credit scores of 720+). Near Prime includes B, C, D credit
grade loans (credit scores between 600 and 719). Sub Prime includes E
and HR credit grade loans (credit scores below 600).

    About Prosper

    Prosper (www.prosper.com), America's largest people-to-people
lending marketplace, was created to make consumer lending more
financially and socially rewarding for everyone. Prosper's membership
consists of over 550,000 people from across the country. Since
launching in February 2006, over $110 million in loans have been
funded in the marketplace.

    The way Prosper works is intuitive to people who have used eBay.
Instead of listing and bidding on items, people list and bid on loans
using Prosper's online auction platform. People who want to borrow on
Prosper create loan listings for up to $25,000 and set the maximum
rate they are willing to pay a lender. People who register as Prosper
lenders set the minimum interest rate they are willing to earn and bid
in increments of $50 to $25,000 on loan listings they select. In
addition to criteria commonly used by institutional lenders, such as
credit scores and histories, Prosper lenders can consider borrowers'
personal stories, endorsements from friends, and group affiliations.
Once the auction ends, Prosper takes the bids with the lowest rates
and combines them into one simple loan to the borrower. Prosper
handles all on-going loan administration tasks including loan
repayment and collections on behalf of the matched borrowers and
lenders.

    Prosper was co-founded by Chris Larsen, co-founder of E-LOAN, and
John Witchel, technology entrepreneur. Backed by Accel Partners,
Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital,
and Omidyar Network, Prosper has raised approximately $40 million.
Prosper's marketplace platform is patent pending.

    --30--

    CONTACT: Prosper
             Tiffany Fox, 415-593-5416
             Prosper Communications Director
             tiffany@prosper.com

Edited to fix URLs: HollowOak

[112233]

How many of the 31,620 "New Members" are unverified "friends" ?

[112233]

did prosper wait until the performancing awards were over to send this notice out?

[112233]

the issues with "subprime" in 2007 have been mostly to do with real estate, no? .. fancy mortgages etc

[traveler505]

Anyone notice a trend?


Month -------   Sept   -    Oct   -   Nov   -   Dec
Overall-------   9.75   -   9.28   -   9.13   -   8.34
Prime----   ----   9.01   -   9.09   -   8.86   -   8.46
Near-Prime---   10.14   -   9.35   -   9.40   -   8.43
Sub-Prime----   13.20   -   10.45   -   8.68   -   5.59

[LoanChimp]

Anyone notice a trend?


Month -------   Sept   -    Oct   -   Nov   -   Dec
Overall-------   9.75   -   9.28   -   9.13   -   8.34
Prime----   ----   9.01   -   9.09   -   8.86   -   8.46
Near-Prime---   10.14   -   9.35   -   9.40   -   8.43
Sub-Prime----   13.20   -   10.45   -   8.68   -   5.59

wow

any predictions on when the criteria for the prosper select index is rewritten?

[traveler505]

There's another interesting statistic in there.

Prosper's growth (December 2006 vs. December 2007) resulted entirely from an increase in loan size rather than an increase in number of loans.  In fact, the number of funded loans declined from about 970 to 853.  (Obviously, this is related to the shift away from funding sub-prime borrowers.)

[NewHorizon]

Well, that cuts down on the cost of overhead for each dollar loaned.   

[HollowOak]

Most of this is in line with how I figured the scene would change after lender guidance were issued. What puzzles me is the increase in the rate cap to 35%. That is not in line with the other actions.

[LoanChimp]

Most of this is in line with how I figured the scene would change after lender guidance were issued. What puzzles me is the increase in the rate cap to 35%. That is not in line with the other actions.

How is this puzzling?

when prosper first made the bidding guidance, there were 54 segments (there are more now). Out of those 54, only 15 had net default rates <10%.

I don't have the exact number, but just about as many segments had between 10-20% net default rates (even 1 "A" segment). Rates north of 29% would be needed to get many of these funded. (I haven't had the chance to look at the new segments much, but it should be similar.)

My feeling is that prosper needed to get the max rate up just enough so that (hopefully) many of the 10-20% net default rate segments would have a chance to fund. I haven't looked into it enough to see if it worked well or not...

[HollowOak]

Most of this is in line with how I figured the scene would change after lender guidance were issued. What puzzles me is the increase in the rate cap to 35%. That is not in line with the other actions.

How is this puzzling?

I see your point and it is understandable.

I approached it from a different angle. To me higher rates are synonymous with higher defaults. To the extent that a very high rate virtually guarantees default. If Prosper is trying to shepherd lenders into safer waters, it is counter-intuitive (to me) that at the same time they should allow lenders to be tempted by unrealistic rates that are bound to lead to default.

At some point in time it will be interesting to calculate default curves for loans based upon the loan rates. I'll bet that the 35% curve will have defaults that'll make earning a return impossible.

[LoanChimp]

Most of this is in line with how I figured the scene would change after lender guidance were issued. What puzzles me is the increase in the rate cap to 35%. That is not in line with the other actions.

How is this puzzling?

I see your point and it is understandable.

I approached it from a different angle. To me higher rates are synonymous with higher defaults. To the extent that a very high rate virtually guarantees default. If Prosper is trying to shepherd lenders into safer waters, it is counter-intuitive (to me) that at the same time they should allow lenders to be tempted by unrealistic rates that are bound to lead to default.

At some point in time it will be interesting to calculate default curves for loans based upon the loan rates. I'll bet that the 35% curve will have defaults that'll make earning a return impossible.

Perhaps, but lenders will never know until it's too late. Prosper will get the data they need in the end.

viva la guinea pig!

[Tokyo Joe]

I see Prosper is crowing about that ridiculous blog winning that ridiculous prize 2 weeks into its inception... 

[zcommodore]

How many of the 31,620 "New Members" are unverified "friends" ?

I don't know how many are actually "friends" but I've got quite a few "referrals" to my credit on Prosper but only 6-7% seem to turn into a successful borrower or lender.  Most of the rest never get past "registered".

[112233]

I see Prosper is crowing about that ridiculous blog winning that ridiculous prize 2 weeks into its inception... 

awards are being kept track of
http://uncyclopedia.org/wiki/Prosper