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[Fred93]

Fred93 has updated his blog again.  Sorry, no charts this time.  Just the ravings of a madman, who thinks prosper should be doing more than it is in the legal department.

http://www.prospers.org/blogs/Fred93/2008/05/18/prosper_com_here_s_what_you_should_do

[bamalucky]

You only blogged because i blogged earlier today. 

http://www.prospers.org/blogs/bamalucky

[bamalucky]

Regarding the blog.

Letters to lates cost .41 cents.You can't expect PMI to outlay that kinda cash on your poor lending choices. 

[j9359]

Fred93 has updated his blog again.  Sorry, no charts this time.  Just the ravings of a madman, who thinks prosper should be doing more than it is in the legal department.
http://www.prospers.org/blogs/Fred93/2008/05/18/prosper_com_here_s_what_you_should_do

Very good post.  I think you really hit the nail on the head with this statement:

Because the Prosper founders didn't think collections would be much of a problem, they didn't devise a good method to fund collection activities.

I think a lot of what has transpired over the last couple of years has surprised Prosper management and they have been slow to recognize and adapt.
john.

[bamalucky]

Surprise should have took place in 2006.The last time i looked,it was 2008 & still nothing was being done.

[mothandrust]

I've heard many jokes about what should be done with the lawyers.

But I'm not laughing at this one.

The legal test case has returned $0 to lenders so far.  It enabled Prosper to take 66 bad loans out of the database, prop up its declining returns, and to provide a future revenue stream for its legal staff so they can conserve funds for generate corporate expenses.

The lawyers should be rewriting the loan documents to favor lenders rather than borrowers in ways that lenders have suggested many times (like having the borrowers pay for collections costs and have them agree to wage garnishments if their loan is ever late).

[Fred93]

The legal test case has returned $0 to lenders so far.  It enabled Prosper to take 66 bad loans out of the database, prop up its declining returns, and to provide a future revenue stream for its legal staff so they can conserve funds for generate corporate expenses.

I don't think that's why they did it.  I agree with you that they shouldn't have removed the 66 loans from the performance statistics, but I don't think the effect is so huge as to prop up anything.  It would have been better had they paid attention to detail, or if they had fixed the problem after realizing it, but in my opinion it isn't at the same level of concern as their simple lack of sufficient activity with the late borrowers.

The lawyers should be rewriting the loan documents to favor lenders rather than borrowers in ways that lenders have suggested many times (like having the borrowers pay for collections costs and have them agree to wage garnishments if their loan is ever late).

I agree that it is very difficult to understand why they haven't fixed the agreements.  Seems like basic homework.

[zcommodore]

Regarding the blog.

Letters to lates cost .41 cents.You can't expect PMI to outlay that kinda cash on your poor lending choices. 

Just picking a nit here but postage went up to 42 cents as of Monday, May 12.

[NewHorizon]

in other words about 660 loans, ten times the size of the existing legal test,

I think I kinda disagree with this...

Maybe xraider or somebody could chime in, but I think that if Prosper did something technically (or otherwise) wrong with the test, then that's 66 cases that Prosper would need to fix (such as re-filing or whatever).  Or maybe when the first case goes to court and gets dismissed for whatever reason, then the other 65 defendants are going to angle for the same dismissal.  What a mess - it could all fall apart.

And multiple this problem by 10 if the test size is 660.

No, I think Prosper needs a small group to set precedents (if not to feel their own way through the process).  Then with precedents in hand, it'd be easier to do the rest of the California cases en-masse (more or less).

... and then move on to borrowers in other states.

[bankomatic]

Out of all those who defaulted on the loans how many will be able to pay it back, assuming prosper wins the lawsuit? Correct me if I am wrong, but if a borrower declares a bankruptcy the unsecured debt will be discharged and we can't collect.

[bamalucky]

Out of all those who defaulted on the loans how many will be able to pay it back, assuming prosper wins the lawsuit? Correct me if I am wrong, but if a borrower declares a bankruptcy the unsecured debt will be discharged and we can't collect.

Maybe 1 or 2,but PMI is "supposed" to be sure these people have assets,hence picking these 60 lawsuits.

[112233]

Out of all those who defaulted on the loans how many will be able to pay it back, assuming prosper wins the lawsuit? Correct me if I am wrong, but if a borrower declares a bankruptcy the unsecured debt will be discharged and we can't collect.

there was a mention of a chapter 13 BKer around here making payments .. Im sure that's the exception though

[xraider]

NewHorizon, I'm curious, too, about why 66 cases. If Prosper wanted test cases, it could have sued one or two borrowers in each Los Angeles county to get a pulse on how the judges felt about Prosper....and could have sued in more than one state. 

I think that suits are appropriate, but they do have to be prosecuted for Prosper to determine whether they'll work.

I suspect that a lot of the defendants will default, and others will settle, and I can't predict how many will go to trial. In California, fwiw, more than 90% of cases settle, and I have no reason to believe that the NAT suits will be different.

On another note, I've long advocated that Prosper change the promissory notes to include legal fees, and I'm disappointed that it hasn't done so yet.

[Mtnchick]

Surprise should have took place in 2006.The last time i looked,it was 2008 & still nothing was being done.

Bingo.

Unfortunately I'm not sure their "legal department" is top shelf. We've seen errors in legal documents, the infamous 123456789 debacle, the slow/failure to serve those whom they ARE suing.....It's like there's a little black cloud following them around.

[ira01]

I suspect that a lot of the defendants will default, and others will settle, and I can't predict how many will go to trial. In California, fwiw, more than 90% of cases settle, and I have no reason to believe that the NAT suits will be different.

Paragraph 17 of the Lending Agreement states:

Prosper does not have the right to change any term or provision of a Note you purchase from Prosper under this Agreement except as authorized in the Promissory Note.

I can't recall whether Prosper's email to the NAT lenders requiring them to opt in or out of the NAT purported to give Prosper the right to settle the NAT cases on terms different than provided in the Notes (i.e., at a discount), but if not, it seems to me that any such settlement would be a breach bny Prosper of the Lending Agreement, obligating Prosper to pay the difference.