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.
It seems to me that two completely different issues are only being discussed lumped together here. There are TWO issues:
1) When (and under what circumstances, and for what minimum (if any) price) should Prosper sell the 4+month lates; and
2) When should Prosper's default and other performance statistics reflect economic reality, rather than simply hew to
the (largely) irrelevant (for this purpose) distinction between stinky old lates that are sold and stinky old lates that could have been, but have not yet been, sold.
As everyone knows, I am one of Prosper's harshest critics when it comes to its misleading advertisements, misleading press releases, and its tendency to distort performance data in ways that always (surprise) favor Prosper (e.g., the shameful treatment of the 66 NAT loans). Certainly, continuing to carry $6.5M of Late-4's on the books is highly advantageous to Prosper's PR spin; as I've noted in other threads, Prosper's default "rate" is going to roughly double after the debt sale, which must really worry them. And it is very possible that Prosper is taking that into account in determining whether to sell the debt now, which breached Prosper's duties to lenders (which is to act in OUR best interest, not Prosper's).
BUT, that doesn't mean that it HAS to be that way. Prosper should separate these two issues, by treating all 4+ month lates as if they were defaulted for purposes of its performance statistics. If any of these loans later make further payments, or even cure, they can be added back in to reflect that reality. But in the meantime, the performance numbers should reflect the reality that we all know -- that 4+ month lates ARE defaults, in everything but name.
If Prosper made that change, then it would eliminate the conflict of interest that Prosper currently has in setting the timing of the JDB sales, and it would allow more reasoned thought about the best way (and timing) for conducting debt sales. As I've noted before, I'm not so sure that the debt should be sold off for 1.5% (or for the 0.5% that someone else suggested). If it wasn't for Prosper's misleading treatment of Late-4's in its performance numbers, "clearing the loans off the books" would only matter on an annual basis, for tax purposes.
In other words, bama is 100% right.
Quoted for posterity!