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[HollowOak]

Lenders on several internal threads today remarked that Prosper has reclassified loans repurchased under the New Agency Test^* program from "repurchased" to "defaulted."

This thread has been started to permit discussion in the Lobby.

^*NAT loans were repurchased by PMI from borrowers on an opt-in basis to permit Prosper to initiate legal proceedings against these borrowers as test cases.

[cubbiesnextyr]

A list of all known information about the legal proceedings progress can be found here:
http://www.prospers.org/wiki/NewAgencyTest

[Fred93]

I'm glad to see that Prosper finally saw the light on this issue.  Now the loans are properly categorized.  It is just amazing how long it took for this issue to get thru to them.

[pioneer11]

Well, since they were "repurchased" for $0.00, the term "defaulted" seems appropriate.

[nonattender]

Hooray for marketplace data integrity and full transparency.  I'm glad this particular issue is resolved.

-t

[Heavens2Murgetroid]

Hooray for marketplace data integrity and full transparency.  I'm glad this particular issue is resolved.

-t

Agreed. Thank you to Prosper for fixing this.   

[ira01]

Hooray for marketplace data integrity and full transparency.  I'm glad this particular issue is resolved.

As you are well aware (but others here may not be), there is nothing remotely close to "marketplace data integrity and full transparency" with Prosper.  But this step was certainly a (belated) step in the right direction.  The next move Prosper needs to make in this direction is treating all of the 4+month lates that should have (but haven't) already been sold to a JDB as defaulted for purposes of lender reporting and the performance tab and related statistics.  Of course, considering that is more than $8 million worth of loans (which is about $1 million more than the amount of loans marked defaulted in Prosper's entire history), that will have a very significant effect on Prosper's numbers.

[Fred93]

As you are well aware (but others here may not be), there is nothing remotely close to "marketplace data integrity and full transparency" with Prosper. 

I agree transparency is lacking.  However...

The next move Prosper needs to make in this direction is treating all of the 4+month lates that should have (but haven't) already been sold to a JDB as defaulted for purposes of lender reporting and the performance tab and related statistics.  Of course, considering that is more than $8 million worth of loans (which is about $1 million more than the amount of loans marked defaulted in Prosper's entire history), that will have a very significant effect on Prosper's numbers.

It will change how some naive users interpret the numbers (and how some journalists can be fooled) but it should not change the ROI numbers much.  The reason is that the roll rates they use (assumptions about what fraction of late loans will go on to default) in the ROI calculation should already take into account the fact that most 4+ late loans go on to default.  In fact if you look at the "substitute roll rate assumptions" on this page http://www.prosper.com/help/topics/lender-marketplace_performance_calculation.aspx , which are the roll rates they use when there isn't enough data to use actual computed roll rates, you will see that the row of the table for "121 to 150" day late loans shows 100% in every column.  In other words they are saying that they assume (and thus agree with you) that all 4+ late loans are probably gonna default.

I do agree with you that they should get on with presenting these loans that have effectively changed state in a fashion that more clearly reveals their true status.

[HollowOak]

We are probably seeing the first part of a move to implement what Doug Fuller referred to here:

Instead, we are going to consider the loans as charged off, and keep them and continue to try to collect them as charged off debts.
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Several people have expressed concern regarding how 121+ dpd loans are reported.   We are working to create a new loan status of “charged off”.  Loans in this status will not have their balance “zeroed” out (so that they can still accrue interest), but they will not be eligible to revert to a “current” or “delinquent” status even if a payment is received.

Which bring me to ask something I thought about last time I read that.

Why on earth are they doing it the way they are?  Why in the name of all that is holy would they continue to accumulate interest, but make it so that if a borrower should (&deity forbid) actually pay, the loan cannot revert to being current?

Also, what he did not say is how the loan balance of charged off loans would reflect in lenders' account statements. Last thing I want is for Prosper to continue showing an ever0increasing balance on a "charged-off" loan in my already fictitious account value.

[xraider]

We are probably seeing the first part of a move to implement what Doug Fuller referred to here:

Instead, we are going to consider the loans as charged off, and keep them and continue to try to collect them as charged off debts.
:
:
:
Several people have expressed concern regarding how 121+ dpd loans are reported.   We are working to create a new loan status of “charged off”.  Loans in this status will not have their balance “zeroed” out (so that they can still accrue interest), but they will not be eligible to revert to a “current” or “delinquent” status even if a payment is received.

Which bring me to ask something I thought about last time I read that.

Why on earth are they doing it the way they are?  Why in the name of all that is holy would they continue to accumulate interest, but make it so that if a borrower should (&deity forbid) actually pay, the loan cannot revert to being current?

Also, what he did not say is how the loan balance of charged off loans would reflect in lenders' account statements. Last thing I want is for Prosper to continue showing an ever0increasing balance on a "charged-off" loan in my already fictitious account value.

+1.  I don't like seeing my late loans pumping up my "value of loans" info.  As one example, my 9+ late shows a principal balance of $43.63.  Because of accruing interest (ha!), it has a loan "value" of $53.07.  That, in turn, with my other lates, has pumped up the "value of loans" to $1,961.23.  If only the principal of my 6 2+ lates were included, the value of my loans would be approximately $60 less.  If the lates were backed out altogether, my "value of loans" would be about $1600. 

[nonattender]

Several people have expressed concern regarding how 121+ dpd loans are reported.   We are working to create a new loan status of “charged off”.  Loans in this status will not have their balance “zeroed” out (so that they can still accrue interest), but they will not be eligible to revert to a “current” or “delinquent” status even if a payment is received.

Which bring me to ask something I thought about last time I read that.

Why on earth are they doing it the way they are?  Why in the name of all that is holy would they continue to accumulate interest, but make it so that if a borrower should (&deity forbid) actually pay, the loan cannot revert to being current?

Because reversion to "current" would de-accelerate the note, and re-tie the post-charge-off-collection hands that got you that payment.

-t

[ira01]

Several people have expressed concern regarding how 121+ dpd loans are reported.   We are working to create a new loan status of “charged off”.  Loans in this status will not have their balance “zeroed” out (so that they can still accrue interest), but they will not be eligible to revert to a “current” or “delinquent” status even if a payment is received.

Which bring me to ask something I thought about last time I read that.

Why on earth are they doing it the way they are?  Why in the name of all that is holy would they continue to accumulate interest, but make it so that if a borrower should (&deity forbid) actually pay, the loan cannot revert to being current?

Because reversion to "current" would de-accelerate the note, and re-tie the post-charge-off-collection hands that got you that payment.

As I posted at the time, we need a clear explanation of exactly what Prosper has in mind with its "post-charge-off collection techniques."  One seemingly obvious concern is that a borrower is going to be far less motivated to pay the delinquent amount if doing so will leave the loan "delinquent" since the borrower only paid the several months worth of overdue payments, rather than the entire outstanding accelerated amount.  Such a borrower may well conclude (rationally) that if Prosper is going to continue reporting the loan as delinquent even if the borrower catches up on the monthly payments, then the borrower may as well pay nothing, hope that Prosper eventually sells the loan to a JDB for a pittance, and then the borrower can negotiate with the JDB to both pay only a fraction of the outstanding balance, and to have the JDB report the loan favorably to the CRA's -- both of which the JDB is likely to agree to, but which Prosper cannot agree to (especially with respect to settling the debt for a portion of the balance, which Prosper is expressly prohibited from doing in the legal agreements, not that Prosper considers itself bound by those, of course).

[Senator]

Also, what he did not say is how the loan balance of charged off loans would reflect in lenders' account statements. Last thing I want is for Prosper to continue showing an ever0increasing balance on a "charged-off" loan in my already fictitious account value.

That's why I post that number in my profile (below).  Prosper shows my Total Account Value as greater than my net Transfers when I know it's really less than that.