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[mothandrust]

Either the credit market's tanking really are having a significant effect on the resale value (in which case they should not have held off on quarterly sales).  Or iLie's statement that the longer these loans stay delinquent the less they are worth on the resale market is extremely accurate.

We're not paying Doug Fuller to time the credit markets and delay debt sales in the hope that junk debt prices will go up.

We're paying him to get the best offered price for our defaulted loans and to give us that price. 

For all we know, there is another leg down, and 3 months from now there will be a panic involving not just subprime homes but auto loans, credit cards, and whatnot.

If that happens, the prices will be even more depressed than they are now.

Or maybe things will turn up and the prices will be better?  No one knows.  If Doug Fuller thinks he knows, he can speculate with his own money, but please don't do it with my portfolio.

Take the best offer, sell at the market price.  Repeat quarterly.  Don't try to be cute.

[ira01]

Either the credit market's tanking really are having a significant effect on the resale value (in which case they should not have held off on quarterly sales).  Or iLie's statement that the longer these loans stay delinquent the less they are worth on the resale market is extremely accurate.

We're not paying Doug Fuller to time the credit markets and delay debt sales in the hope that junk debt prices will go up.

We're paying him to get the best offered price for our defaulted loans and to give us that price. 

For all we know, there is another leg down, and 3 months from now there will be a panic involving not just subprime homes but auto loans, credit cards, and whatnot.

If that happens, the prices will be even more depressed than they are now.

Or maybe things will turn up and the prices will be better?  No one knows.  If Doug Fuller thinks he knows, he can speculate with his own money, but please don't do it with my portfolio.

Take the best offer, sell at the market price.  Repeat quarterly.  Don't try to be cute.

Doesn't this depend on just what the bids were?  For example, if the highest bid was 1.5%, is it really worth selling the loans for that pittance?

[mothandrust]

He said they received 8 bids; if that is true, the name them off and accept the highest competitive bid that was offered, and if that's 1.5% then so be it.

3 months from now there will be another batch of defaulted loans to sell. 

[xraider]

I'm with mothandrust.  I don't see the credit market improving any time soon, and am concerned that Prosper will have a bigger and bigger wad of bad debt it's trying to dump into a market that's getting worse and worse.  So, our loans are going to be worth less and less as time goes on.  IMO, Prosper should just suck it up and sell for the best offer, instead of holding on indefinitely until it thinks it can get a better return.

In response to the person who asked about the lawsuits, nothing appears to be happening on the New Agency Test suits.  None appears to have been served yet, which is a disappointment.

[iLIE]

Doesn't this depend on just what the bids were?  For example, if the highest bid was 1.5%, is it really worth selling the loans for that pittance?

Yes,sell them at any price.It may be .56% in a few months.

I'm gonna type this real slow for the people who didn't get it the first 20 times.

THE OLDER A DEBT IS,THE LESS IT IS WORTH.!!!

We all know what this is gonna do to prosper advertising.This is the real reason the debt isn't being sold at this time.

[iLIE]

Who do i get the feeling that the blog editor isn't letting any comments through?

I'm having a hard time believing there are no comments.

[mhs505]

Doesn't this depend on just what the bids were?  For example, if the highest bid was 1.5%, is it really worth selling the loans for that pittance?

Be careful, that is an unpopular opinion, but I agree.  

I have also never been of the opinion that you absolutely need a debt sale to write these off :

What do you know -- I did pretty good!  From: http://www.irs.gov/taxtopics/tc453.html

Topic 453 - Bad Debt Deduction

If someone owes you money that you cannot collect, you may have a bad debt. For a discussion of what constitutes a valid debt, refer to Publication 550, Investment Income and Expenses, and Publication 535, Business Expense. To deduct a bad debt, you must have previously included the amount in your income or loaned out your cash. If you are a cash basis taxpayer, as most individuals are, you may not take a bad debt deduction for income you expected to receive but did not because the amount was never included in your income. For a bad debt, you must show that there was an intention at the time of the transaction to make a loan and not a gift.

There are two kinds of bad debts – business and nonbusiness. A business bad debt, generally, is one that comes from operating your trade or business. A business deducts its bad debts from gross income when figuring its taxable income. Business bad debts may be deducted in part or in full.

All other bad debts are nonbusiness. Nonbusiness bad debts must be totally worthless to be deductible. You cannot deduct a partially worthless nonbusiness bad debt. You must establish that you have taken reasonable steps to collect the debt and the debt is worthless. It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. You may take the deduction only in the year the debt becomes worthless. A debt becomes worthless when the surrounding facts and circumstances indicate there is no longer any chance the amount owed will be paid. You do not have to wait until a debt is due to determine whether it is worthless.

A nonbusiness bad debt is reported as a short–term capital loss in Part 1 on Form 1040, Schedule D (PDF). It would be subject to the capital loss limitations. A nonbusiness bad debt deduction requires a separate detailed statement attached to your return.

For more information on nonbusiness bad debts, refer to Publication 550, Investment Income and Expenses. For more information on business bad debts, refer to Publication 535, Business Expenses.

Based on that language, I have never thought that you absolutely need a debt sale to write off a PMI loan.   I haven't done a bunch of research reading cases, but my opinion is that if you have a loan that hasn't made a payment in over a year (or two if you really want to be cautious),  (and you had been picking up the interest as income when it was paying) you take the position that it is a bad debt.  

If the loan is later sold, you can always pick up whatever money you get from the JDB in the year it is sold.  Happens all the time.  

In compliance with U.S. Treasury Circular 230 Regulations and any applicable state laws, you are hereby notified that any tax advice contained in the body of this document, or attachments thereto, was not intended or written to be used, and cannot be used, by the recipient or any other party for the purpose of (1) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein.

[iLIE]

MHS,as an active lender you should want this debt sold & reflected on the performance tab & advertising so bid rates wouldn't be driven so low.

New lenders have no idea that 6.5 million 4+ lates aren't included in all of the advertising etc.Nor is it ever mentioned in fluff articles released by Tiffany Fox.

[Tokyo Joe]

Well, here's what I think, fwiw, after reading all this.

1. Propser's bad loans sure must have the reputation of being junk.  I love the spin they put on this: Prosper received a record number of bids on the sale file (eight).   Whoopie, way to go Prosper. 

2. As far as Prosper's junk goes, this is probably the "best" load of junk they ever had for sale; the average loan has a higher credit grade now than it did 2 years ago.

3. Nonetheless, even Prosper is forced to admit that the offers are utter crap.

4. If nobody wants to buy this load of junk, it seems likely that nobody will want the next load of junk either...


So: should they have sold to the highest bidder for peanuts?

Add my vote to the "of course" pile.  The money is gone; let's clear it off the books.

By not selling it, Prosper is keeping their own figures inflated and misleading, and that bothers me more than getting 1 cent on the dollar.


In other words, bama is 100% right.


The advertising has bugged me for a long time, and if the ads aren't changed following ths debacle, I find it very tempting to lodge a complaint with the SEC and the FTC for blatantly dishonest and misleading advertising, mishandling of "securities", and failure to meet minimal standards of fidiciary duty.

This whole thing is BS.  If they can't sell the junk, then they need to say so explicity.  Not bury it in fine print, not skip mentioning it at all...

Holding onto these loans is not going to do any good whatsoever.  The odds that anyone will make a payment is slim, and 98% will get no payments.

Sell them, close the books on them, note it in the performance data (by including a "sold" column-- I think the performance tab is misleading enough as it is that it merits a complaint to the SEC/FTC regardless of whether the loans are sold or not).

I've had about enough of Prosper's mealymouthed sunshine and lollipops in the face of incompetency and duplicity.

If Prosper is unable to sell, and unwilling to admit this in their performance record and performance projections, then how are they better than any other ripoff artist on the internet?

[mhs505]

Again, what is the industry standard for selling debt?  How long do others hold it?

[Tokyo Joe]

Again, what is the industry standard for selling debt?  How long do others hold it?

It doesn't matter what the "industry standard" is.  Prosper has intimated that debt sales will be quarterly events.  And their own advertising and performance data doesn't accurately reflect the sale.

I understand that you gulped the koolaid at Prosper Days, mhs505.  But I really don't see any legitimate defense for continuing to publish bogus data for lenders to make lending decisions with.

If a guy on the internet said "send $1000 and double it in 3 weeks", you'd call him a scammer.

If Prosper says, lend with us and make 9.5%, how is it any less of a scam?

[Chamatrain]

Again, what is the industry standard for selling debt?  How long do others hold it?

Well, I don't believe we'll find PMI trying to meet anybody's standards for anything, but my understanding is that medical debt is sold after 90-100 days.

[NewHorizon]

If PMI sells the loans they will have to put 6.5 million of defaults on the performance tab. That is more than all the other defaults combined.

Maybe somebody expressed an interest in buying Prosper?  Can't have the performance data take a nosedive *now*!   
Must ......  hold ...... on.....

[mhs505]

I understand that you gulped the koolaid at Prosper Days, mhs505. 

That is unnecessary TJ and really below you. 

I am NOT talking about what they said they would do or not.  I agree that is what they said, and that there is a contract.    That doesn't mean that I think it is a good idea, or that they should continue to write their agreements that way. 

And it doesnt' answer the question -- what is the industry standard?

[NewHorizon]

Unfortunately, all of the bids were extremely low.

Me-thinks the bid amounts aren't going to recover.  The fallout from the sub-prime mess has simply reset these prices - permanently.

Or to put it another way, the prices *have* recovered from where they were when the market was irrationally exuberant over sub-prime securities.  I don't think we'll return to those prices any time soon.