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[iLIE]

I would also find it very odd & possibly illegal if the current debt collectors who are trying to collect for us were allowed to bid.

This would put them in the situation where collecting for us wasn't a priority.

[iLIE]

I believe i could collect money from 20 of these loans in a week..Honestly.

It takes them 6 weeks to collect from 12.

[snake]

I left following comment in the blog. I doubt that it will be published, but i think its fairly worded (i.e. not flaming)

When will prosper update its performance statistics to include the loans in the "bid file"? I.E. those loans are currently not in default status, despite the fact that Prosper has solicited bids (and RECEIVED bids) for them.

What is the reason for not considering those loans as defaulted in the performance statistics?    Is prosper unwilling to "book" the loss on the performance page? Why not simply mark them as defaulted with a value of pending, or "best bid received"?

[xraider]

Thanks, Doug, for answering my questions.

[j9359]

I believe i could collect money from 20 of these loans in a week..Honestly.

It takes them 6 weeks to collect from 12.

Hey I've got one in AL http://www.prosper.com/lend/listing.aspx?listingID=65925
Loan value $47.84 principle balance $41.23
how much do you bid
john.

[iLIE]

Thats not far from me (40 miles) but i can't top the $1.25 offer from the JDB 

[iLIE]

Wow..more comments allowed to go through!

http://blog.prosper.com/2008/05/02/debt-sale-update/#comments

Chrisfs | May 4th, 2008 at 5:06 pm

The news is filled with debt that can’t find buyer. Thanks for keeping us informed.

Hey dumbass,we have a buyer..Sell this shit!

I'm surprised Chrisfs got a blog comment through 

[ira01]

It's all just a farce to prop up the soaring default rate.

While that may very well influence Prosper's decision making, the best answer to that is for Prosper to simply count the loans as defaulted for performance purposes.  That would eliminate that particular conflict of interest.

No lender cares if the amount is 6 cents or 9 cents on the dollar, it is a loss that can't be written off, so Prosper is denying lenders both their money and their losses by holding the debt.

First of all, it isn't 6 cents or 9 cents, it is apparently about 3 cents for AA-D, 2.4 cents for E and HR, and 1.3 cents for NC (and perhaps only 1.2 cents for Texas loans).  Second, I care what the amount is (and I imagine most other lenders do too).  Third, for the thousandth time, the writeoff issue is irrelevant at this point in the calendar.  As long as Prosper gets the loans sold off for sure by December 31, we all get exactly the same ability to write them off as if Prosper sold them tomorrow.

No one wants to buy this crap; the loans are totally worthless . . . .

Apparently not true -- there ARE (supposedly) bidders.  They're just bidding at fire-sale prices.

PMI, take 1 penny on the dollar and let lenders write off their losses.

In December, maybe, but I'll be pretty pissed if they sell my loans off for 1 penny in May (especially since 1 made a payment about a month ago).

[iLIE]

Ira,if PMI will add these defaults to the performance tab,the reward for lenders will far outweigh the 3% defaults receive.

THE OLDER A DEBT IS THE LESS IT IS WORTH!

[mothandrust]

I left following comment in the blog. I doubt that it will be published, but i think its fairly worded (i.e. not flaming)

When will prosper update its performance statistics to include the loans in the "bid file"? I.E. those loans are currently not in default status, despite the fact that Prosper has solicited bids (and RECEIVED bids) for them.

What is the reason for not considering those loans as defaulted in the performance statistics?    Is prosper unwilling to "book" the loss on the performance page? Why not simply mark them as defaulted with a value of pending, or "best bid received"?

The performance statistics are linked to the Lender Guidance--which might say today that a loan will yield an 8% ROI, but after the losses are booked, the exact same listing might show a 4% return.

Since few people are going to bid on a listing promising a 4% estimated ROI, Prosper needs to solve this problem or the number of funded loans are going to fall off a cliff.

One solution is to "improve" the Lender Guidance by making it more complicated, setting the defaults in such a way that post-sale the numbers still show 8+% estimated ROI's for a lot of listings.

[LoanChimp]

I left following comment in the blog. I doubt that it will be published, but i think its fairly worded (i.e. not flaming)

When will prosper update its performance statistics to include the loans in the "bid file"? I.E. those loans are currently not in default status, despite the fact that Prosper has solicited bids (and RECEIVED bids) for them.

What is the reason for not considering those loans as defaulted in the performance statistics?    Is prosper unwilling to "book" the loss on the performance page? Why not simply mark them as defaulted with a value of pending, or "best bid received"?

The performance statistics are linked to the Lender Guidance--which might say today that a loan will yield an 8% ROI, but after the losses are booked, the exact same listing might show a 4% return.

Since few people are going to bid on a listing promising a 4% estimated ROI, Prosper needs to solve this problem or the number of funded loans are going to fall off a cliff.

One solution is to "improve" the Lender Guidance by making it more complicated, setting the defaults in such a way that post-sale the numbers still show 8+% estimated ROI's for a lot of listings.

It is my understanding that the Bidding Guidance is fixed in time, and not "linked" with real time data.

It is also my understanding that loans switching from "4+months late" to "default" will not have a tremendous impact. If I have the chance, I'll be watching...

[Fred93]

It is also my understanding that loans switching from "4+months late" to "default" will not have a tremendous impact. If I have the chance, I'll be watching...

Right. ...but the performance calculation makes assumptions about roll rates and value at sale.  The tables containing these assumptions are based on historical and now-seem-to-be-optimistic assumptions.  Therefore the calculated ROIs should go down a bit when this batch of old loans are finally sold.  The assumptions then need to be updated, so that they fairly value the next wave of late loans.

Then there's the 66 loans that were put in "repurchased" status for the lawsuits, which effectively took 66 probably-going-to-default loans out of the calculation.  Those need to be put back.  I haven't tried to compute the magnitude of the effect of the mischarachterization of this group of loans.

[ira01]

Ira,if PMI will add these defaults to the performance tab,the reward for lenders will far outweigh the 3% defaults receive.

I agree, but this doesn't have to be an either or situation.  Prosper should count the loans as defaults, regardless of whether it has a debt sale now or not.

[NPX]

Third, for the thousandth time, the writeoff issue is irrelevant at this point in the calendar.  As long as Prosper gets the loans sold off for sure by December 31, we all get exactly the same ability to write them off as if Prosper sold them tomorrow.

Is this right?  If I have a loan that originated in, say, June 2007, don't I get to call it a short-term capital loss if it's sold before June 2008, while it becomes a long-term capital loss, with different (less favorable) tax consequences, if it's sold after that?

Given the debt-sale prices being quoted, wouldn't many lenders be better of if P------ simply declared the loans to be uncollectible, ie "bad debt"?  As I understand it, having $100 in "bad debt" is generally going to be better from a tax perspective than having, say $97 in long-term capital loss.

Any tax mavens here wish to help me out with this?

[Fred93]

Third, for the thousandth time, the writeoff issue is irrelevant at this point in the calendar.  As long as Prosper gets the loans sold off for sure by December 31, we all get exactly the same ability to write them off as if Prosper sold them tomorrow.

Is this right?  If I have a loan that originated in, say, June 2007, don't I get to call it a short-term capital loss if it's sold before June 2008, while it becomes a long-term capital loss, with different (less favorable) tax consequences, if it's sold after that?

You are correct.  There are some loans where the lender suffers if a slow selling process delays sale beyond the 1-year-since-origination date. 

I don't know what fraction of the loans in the pool to be sold are in the range of dates where this is important.  (ie loans that might be harmed by delay are those that were 4+ late at the cutoff date, and not bk, and at least say 9 months old at that time but not yet say 11 months old.  These loans would be sold under the 12 month tax cutoff in a quick sale, but are at risk of slipping into the long term loss category in a slow sale.)  Someone could get a quick estimate using the reports on lendingstats.   Thinking more I believe lendingstats doesn't have quite enough info.  No way to do the "4+ late as of a cutoff date" selection on lendingstats.

Of course to the lender holding such a loan... He doesn't care what fraction of the loans are in this category.  He's just pissed that Prosper let his loan slip into long term and cost him a bunch more tax.

This is a damn strange quirk of the tax law.  I often sell stocks that have fallen in price significantly at the 12 month point.  Its called "harvesting losses".  On prosper, there's no way to harvest these losses, and most loans that go bad end up as long term losses.  Did I hear somewhere that even the secondary market won't fix this problem -- 'cause its gonna be limited to loans that are current?