I think it is worth pointing out that prosper has finally broken their April 2007 record for loans funded this past May. And did so with a more conservative basket of higher quality loans.
http://www.lendingstats.com/loansFunded
I am sure that finally opening up the borrower market to 36% in almost every state had a lot to do with this.
There is something inconsistent about these two points. I don't think that listings that required a rate of 36% to get funded are likely to be very "conservative" or "higher quality." To the contrary, I think that 36% listings just enticed greedy/newbie lenders to bid on crap loans that will default in higher than average numbers. I guess we'll see in 6 months or so.
ETA: I think there are actually two strands of this effect working. One, I stated above (that being able to offer an even higher interest rate let more crap loans get funded). But the second strand, which I didn't note before, would be that in those states that had completely unrealistic rate caps (such that few, if any, loans ever funded), being able to offer an "appropriate" rate based on the merits of the listing would also allow more (non-crap) loans to fund. I have no idea which of these two strands is larger in terms of numbers of loans (or dollars) funded.