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[HollowOak]

OK, attack time from the other flank. It may help if you reference the thread where I made the statement so I can see it in context. Lately a lot of what I say seems to be taken out of context.

Until the facts support the hypothesis, it doesn't matter what Prosper was conceived as. It is up to Prosper management to either change the type of borrowers who they attract or to build a site that can work with the types of borrowers they do attract. You can only work with what you have - and that determines what you make.

In another thread, where I suggested that PMI bares some responsibility for the grades of borrowers present here, you told me that they were simply giving the market what they wanted, and that they bare no responsibility for its composition.  Are you now claiming that PMI can, in fact, influence the marketplace?

I highlighted a part of my quoted post. Does that answer our question?

Nope.  First, exactly what does Prosper have?  What do they actually make?

Prosper have (as ingredients) the following: Those people looking on the Internet for a means to borrow and lend money.  What they make is a marketplace where those people get served. How they make it is in how they pitch it, but ultimately your analogy of a soup kitchen is correct. If Prosper sets out to build a soup kitchen, they can't later change the clientèle (although, IIRC, there are one or two successful restaurants that pretend to serve school lunches or soup kitchen fare for thrill-seekers). If they set out to create a high-class eatery in the Bowery, I guess they're going to find a lot of low-class diners on the sidewalk.

However, this is the internet, we can relatively easily build something and rebuild it to target something else. However, fact of the matter is that there are vastly more desperate people and people in financial trouble scouring the Internet for a means of obtaining money than there are credit-worthy borrowers.

Immediately preceding that, you wrote: "It is up to Prosper management to either change the type of borrowers who they attract or to build a site that can work with the types of borrowers they do attract."  So, which one are they doing?  Are they changing the type of borrowers they attract, or are they building a site that can work with the types of borrowers they do attract?

It seems to me that Prosper Management hasn't yet decided exactly what they want to be when they grow up. (I seem to recall saying this more than once previously.)

On the one hand, they have certainly made moves to cut off the low-end of the borrowing spectrum.  On the other hand, they have allowed increased rates, that also only appeal to desperate borrowers and to foolish lenders.

In a prior post I contended that PMI is still experimenting, seeing what will work on the Internet and what ultimately will be the profitable nice for them. They're doing this experimenting with OPM.

Let's talk about the actions of cutting off borrowing to NC's and sub-520 HR's, as well as instituting lender guidance that clearly indicates lending to subprimes is likely going to be a losing proposition.  Is that an action designed to work with the types of borrowers they have?  I don't see how -- since this place clearly attracts subprime borrowers, taking steps to lower their presence here doeesn't seem to be working with what they have.

See above. Or do you contend that allowing borrowers to list at 35% is a move towards attracting prime-grade borrowers?

Second, if they are trying to change the type of borrowers they attract, I don't see how cutting off access to the sub-subprimes and NC's in and of itself attracts better quality borrowers here.  It would be like a soup kitchen barring homeless people from eating there -- the homeless people would go away, but that doesn't mean wealthy clientele are going to walk in the door the next day.

Nice analogy. However, if I'm McDonald's, I might institute a policy that says my clientèle should wear shirts and shoes to be serviced. That is a move towards potentially eliminating the worst type of customer that will drive away other customers.  There are a vast array of restaurants between a soup-kitchen and a 3-star Michelin restaurant. One can tamper slightly with the desired clientèle without having to go to the expense of throwing out the drive-thru window and getting rid of the indoor playground.


ETA: Grammar.

[GLeaderAccountantsChoice]

One thing I have never understood is lenders that (sorry) piss and moan over "poor" borrowers coming to PMI.  People of all shapes and sizes have needs, and that's America, thank [insert your deity / lack of deity here].  Seriously though, why not just accept life for what it is and move on?  IMHO, anyone who actually thought that a website like this could exist without said class of borrowers is most likely being quite ridiculous.  Anyone who would want to rid the website of sub-prime borrowers is also ridiculous for the most part, as sub-prime markets can be profitable to shrewd investors while avoided by others via a millisecond long search on computer.

That said, if people still want to (sorry again) piss and moan, they should probably do so to PMI for different reasons.  PMI tosses people out there with very limited information as lenders in comparison to history's more traditional loan markets.  This makes it more difficult for people to navigate the market than it 'should/could' theoretically be.  PMI does this in the interest of sales volume and adherence to the average US citizens' general tendency to shy away from exposing their personal financial situation.  Both the later reasons for limiting information seemingly take precedence over lender security according to PMI's current business model, so unless lenders want to demand more, their relatively unorganized ranks are doomed to dwindle on the end of PMI's profit hungry rope.

 

[HollowOak]

Not sure if I fall into your "(sorry) piss and moan" category. I accept that there are a multitude of people with needs (financial, in this specific case). Alcoholics have a need for alcohol that transcends any reasonable definition. Similarly some people seemingly have such an affliction for money. In neither of those cases should those needs be satisfied. Even though these folks are in the minority, they might clamor more loudly to get what they perceive they need.

Even leaving these aside, let's briefly look at mass-market appeal. If you design a Mall, you design it to attract a large cross-section of the population. But you do factor in the neighborhood and relative wealth of the surrounding areas. Similarly, Prosper should fashion something that has mass-market appeal to those who will frequent it, without turning it into a pan-handling alley.

Some cases in point. Many descriptions on listings are positively off-putting, relating personal and family matters that better belong on a Jerry Springer show. Folks that see those types of listings may not want to list their relatively straight-forward, emotionally simple requests on the same platform.

Another example. The rough-and-tumble form of interrogation afforded to borrowers in the old RML and nowadays in the COML forums are certainly not something that many folks look forward to. Willingness to subject oneself to that procedure suggests a certain desperation that in itself a more credit-worthy borrower would not want to be associated with.

I could not, however, agree with you more on the availability of saved searches to eliminate unwanted classes of borrowers or with your issues on the (lack of) comprehensive information on which to base lending decisions.

The old style of social lending, based on descriptions and conversations, very quickly turned into a glorified circus, appealing to our baser instincts. Lending by the numbers remove the social aspect, but makes it more "user-friendly" for want of a better description.

[lenderguy]

OK, attack time from the other flank. It may help if you reference the thread where I made the statement so I can see it in context. Lately a lot of what I say seems to be taken out of context.

Somewhere in here:

http://www.prospers.org/forum/ceasefire_or_peace_offering-t5082.0.html;msg73988#msg73988

you suggest that Prosper can't pitch to a market that doesn't exist.  OTOH, I do contend that Prosper's product is a three year loan... which has limited appeal to prime borrowers.  However, I will further contend that a longer amortization term does, in fact, have appeal to the better grades.  Frankly, my thinking is that they have a need for larger amounts of money than the typical smaller subprime loan, but can't swallow the $800/mo nut on a three year repayback term.  Longer amortization periods would provide for a lower monthly payment.

Nice analogy. However, if I'm McDonald's, I might institute a policy that says my clientèle should wear shirts and shoes to be serviced. That is a move towards potentially eliminating the worst type of customer that will drive away other customers.  There are a vast array of restaurants between a soup-kitchen and a 3-star Michelin restaurant. One can tamper slightly with the desired clientèle without having to go to the expense of throwing out the drive-thru window and getting rid of the indoor playground.

Again, I happen to believe that Prosper could gravitate toward "better" clientèle by offering a longer amortization period and possibly higher loan limits.

[SGriff]

Again, I happen to believe that Prosper could gravitate toward "better" clientèle by offering a longer amortization period and possibly higher loan limits.

But do you really believe lenders would be willing to lock up their cash for longer periods? A bid on a 5-year loan had better return better than a 5-year CD, and I don't mean in terms of raw interest rates.

[lenderguy]

But do you really believe lenders would be willing to lock up their cash for longer periods? A bid on a 5-year loan had better return better than a 5-year CD, and I don't mean in terms of raw interest rates.

Yeah, I do.  We have plenty of people willing to tie their money up for three years, why not five?  And besides, if the secondary market ever arrives, then we really wouldn't obligate ourselvees to be locked up for five years.

ETA: If longer amortization periods bring better borrowers, we just might see better net yields.