Prospers.ORG Prosper Forum

Advanced search  

News:

Welcome to Prospers.ORG!   Login here

Pages: 1 2 [3] 4 5 ... 7   Go Down

Author Topic: Prosper debt sale crashes and burns  (Read 30380 times)

HollowOak

  • Hero Member
  • *****
  • Karma: +1/-0
  • Posts: 5154
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #30 on: May 31, 2008, 11:44:30 am »

What would constitute an "unacceptable condition" - and does Prosper get to unilaterally decide what is acceptable?

I'm pretty sure a few of us are asking that question. And hoping that an "unacceptable condition" would not be something like either of
a) Prosper having to repurchase loans where the named borrower proves that they were the subject of ID theft. or
b) Where Prosper has to provide the debt buyer with Borrower PII.
Logged
Old Stump
My blog

Fred93

  • Hero Member
  • *****
  • Karma: +0/-0
  • Posts: 3915
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #31 on: May 31, 2008, 12:34:04 pm »

How is a charge off acceptable?  What does that get us? 

I think it may be an excellent thing.  Present system wasn't working.

I hope that what "charge off" means is that they will now consider the entire loan due, not just a few payments, and will therefore commission whoever is going to do the collecting from that point (inside or outside) to collect the ENTIRE loan amount, and make their compensation therefore be a percentage of that entire loan amount instead of a percentage of a few payments.  This is necessary to fund an appropriate final collection process.  See the discussion of this in my "open letter #2" to prosper.

Sure, there are some legal details in the way, and Prosper's lawyers have been stupid about drafting the documents, and revising them when they knew changes were needed, aren't helping now by figuring out a way to properly proceed, and so forth, but I don't think that's Doug's fault.

Adaptation is necessary.  Present system wasn't working.


« Last Edit: May 31, 2008, 12:36:32 pm by Fred93 »
Logged

ira01

  • Hero Member
  • *****
  • Karma: +68/-1572
  • Posts: 41980
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #32 on: May 31, 2008, 12:55:32 pm »

Quote
We believe the prudent course of business is to not sell at this time.  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.  You will continue to own the loans as we apply post charge off collection techniques to these accounts.

HAHA! Prosper r0x0rz!!!

So these "charge offs" won't be reported in the default category... and by creating an entirely new category, they won't even effect the stats for lates!

Bet when they tally their stats, they subtract this category first, effectively hiding even more bad loans in the stats. A "charge off," which is basically the same as a "charge back," at least for most accounting purposes, comes off the gross first and then of course isn't counted with returns, disputes, etc.

Moral: Don't make a deal with the devil and not expect to dance.

If this is actually what Prosper intends to do (i.e., hide $7M in "defaults" by calling them something else and treating them as "unoriginated" like the 66 NAT loans), I can pretty well guarantee that they will be sued in very short order.  Even Prosper probably isn't that stupid.
Logged
If you're not outraged, you're not paying attention.

Fred93

  • Hero Member
  • *****
  • Karma: +0/-0
  • Posts: 3915
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #33 on: May 31, 2008, 01:04:28 pm »

If this is actually what Prosper intends to do (i.e., hide $7M in "defaults" by calling them something else and treating them as "unoriginated" like the 66 NAT loans), I can pretty well guarantee that they will be sued in very short order.  Even Prosper probably isn't that stupid.

Yes.  However, how they are treated in the database & stats presentation is a different question than how they proceed to take care of these loans.  We need to continue to work on Prosper to get the presentation correct.  My guess is that your use of the word "intends" misinterprets what is happening.  My guess is that the folks thinking about what to do with these bad loans nobody wants to buy are not the same guys who think about how the software works and how it presents the stats.  I just view those as two separate issues and these guys haven't talked.   (Like maybe the JW and the guys who design the software aren't givin' DF the time of day.)  I don't think its appropriate to assign evil intent at this point.  Just assume they aren't very smart and haven't thought thru all the implications yet.

The debt sale was a horrible thing for lenders.  The tax implications were horrible just to mention one issue.  We can do better.  This little crisis in the debt sale operations gives us a wedge to get some changes.  That's a good thing.  They can't proceed with blinders on now that the debt sale has effectively failed.

ira01

  • Hero Member
  • *****
  • Karma: +68/-1572
  • Posts: 41980
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #34 on: May 31, 2008, 01:29:48 pm »

If this is actually what Prosper intends to do (i.e., hide $7M in "defaults" by calling them something else and treating them as "unoriginated" like the 66 NAT loans), I can pretty well guarantee that they will be sued in very short order.  Even Prosper probably isn't that stupid.

Yes.  However, how they are treated in the database & stats presentation is a different question than how they proceed to take care of these loans.  We need to continue to work on Prosper to get the presentation correct.  My guess is that your use of the word "intends" misinterprets what is happening. 

I agree with you, except to note that I stated "If this is actually what Prosper intends to do . . . ."  As shown by by last quoted sentence above, I actually don't think this is what Prosper intends.  But, as you note, different people and departments at Prosper often don't seem to know what each other are doing, and Prosper has proven itself to be masters of missing the implications of what it does and says.  It was very wrong for Prospert to disappear the 66 NAT loans from the data as it did, but at least those 66 loans have a relatively small impact on overall performance -- clearly not the case here where we are now talking about a "charged off" loan volume greater than Prosper's entire lifetime defaulted amount.  Prosper had better get this one correct, or it will quickly be in deep legal shit. 
« Last Edit: May 31, 2008, 01:53:18 pm by ira01 »
Logged
If you're not outraged, you're not paying attention.

Mtnchick

  • Hero Member
  • *****
  • Karma: +320/-986
  • Posts: 35352
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #35 on: May 31, 2008, 01:36:37 pm »

The debt sale was a horrible thing for lenders.  The tax implications were horrible just to mention one issue.  We can do better.  This little crisis in the debt sale operations gives us a wedge to get some changes.  That's a good thing.  They can't proceed with blinders on now that the debt sale has effectively failed.


Keeping fingers crossed they see things the same way.
Logged
Classic comment from Urbi to a poster who said they were leaving:

"Once again, we note that your threats are hollow and you come across like a sad, lonely blowhard.

I doubt anyone here gives a shit about you.  We pretty much all know that you are a vile and unethical parasite of a human being with an abnormal craving for attention."

Fred93

  • Hero Member
  • *****
  • Karma: +0/-0
  • Posts: 3915
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #36 on: May 31, 2008, 01:46:39 pm »

It was very wrong for Prospert to disappear the 66 NAT loans from the data as it did, but at least those 66 loans have a relatively small impact on overall performance -- clearly not the case here where we are now talking about a "charged off" loan volume greater than Prosper's entire lifetime defaulted amount.  Prosper had better get this one correct, or it will quickly be in deep legal shit. 

The fact that the loan volume is so much greater here makes it less likely that the systems guys will dismiss DF by saying something like "Don't bother us with this little crap.  Do your damn test and figure it out and then we'll implement the system when you get it figured out.  Software engineers cost money ya'know."

In any case, we need to "help" them get it right.

Capital_Finance_Group

  • Hero Member
  • *****
  • Karma: +0/-0
  • Posts: 1588
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #37 on: May 31, 2008, 07:17:58 pm »

prosper should do the right thing and repurchase the loans.

Then it can do what it wants with them.

Otherwise, fulfill the terms of its service agreement.

+1 +1 +1 +1 .................................
Logged

regeneration

  • Full Member
  • ***
  • Karma: +0/-0
  • Posts: 225
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #38 on: June 01, 2008, 05:30:18 pm »

Doug Fuller just blogged on the Prosper.com blog as follows:

Quote
I know that many people have been anxiously waiting for an update on the debt sale.  We’ve been working very hard toward finding a more favorable bid, as well as considering alternatives, but we’ve met with some severe obstacles.

Once bids with unacceptable contract conditions were eliminated the highest bid we received was only 1.5 cents on the dollar.  To put this in context, “Out of Statute” paper - consumer debt that is time-barred by the statute of limitations, where the debt holder has not received a payment in 3 to 15 years - gets prices in the range of 0.5 to 0.75 cents.

The problem is that there is so much credit card paper available in the market, that no one is interested in a “novel” asset such as Prosper loans.  More than one bidder had told me that in this market, they’re only spending their money on consumer debt paper they’ve had experience with.

We believe the prudent course of business is to not sell at this time.  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.  You will continue to own the loans as we apply post charge off collection techniques to these accounts.  We recognize that this is different than our normal process, but firmly believe that it will result in a higher return for our lenders.

One of the key arguments for selling bad debt quickly and without applying “post charge off” collection techniques, is that it reduces the value of accounts that don’t respond.  However, given the very low price we’re currently faced with, that’s not really a concern.

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.

One of the things that bothers me most is that there is no sense of Prosper is taking responsibility for their performance (or lack thereof.) 

Of course, it isn't Prosper's fault, it is because JDB's insisting on "unacceptable" contract provisions or refusing to adequately value Prosper's "novel" securities. 

Looking on the bright side, we "will continue to own the loans" and "reduc[ing] the value of accounts... that's not really a concern."
« Last Edit: June 01, 2008, 05:33:46 pm by regeneration »
Logged

onthefence

  • Hero Member
  • *****
  • Karma: +0/-0
  • Posts: 5736
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #39 on: June 01, 2008, 10:24:16 pm »

I wonder what the unacceptable contract provisions were...
Perhaps the JDB had a clause along the lines of insisting that Prosper repurchase any loans that turn out to be a case of identity theft.
Logged
Lobby permission granted

HollowOak

  • Hero Member
  • *****
  • Karma: +1/-0
  • Posts: 5154
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #40 on: June 01, 2008, 10:29:22 pm »

I wonder what the unacceptable contract provisions were...
Perhaps the JDB had a clause along the lines of insisting that Prosper repurchase any loans that turn out to be a case of identity theft.

No, that's just plain silly. If the loans were identity theft loans, Prosper would have repurchased them under the terms of it's 100% identity theft guarantee. Prosper told us long ago, in the old forums, that they have a crack team to investigate identity theft and reports of identity theft.

I'm thinking that the unacceptable conditions could have been along the lines that Prosper had to provide the names and addresses (PII) of the borrowers. We know Prosper is eager to protect the PII of participants in the marketplace, so that might have been a deal-breaker.
Logged
Old Stump
My blog

onthefence

  • Hero Member
  • *****
  • Karma: +0/-0
  • Posts: 5736
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #41 on: June 01, 2008, 10:37:15 pm »

As a side note to Doug Fuller, thanks for posting the updates.  I know this can't always be an easy job.
Logged
Lobby permission granted

ira01

  • Hero Member
  • *****
  • Karma: +68/-1572
  • Posts: 41980
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #42 on: June 02, 2008, 12:32:14 am »

I wonder what the unacceptable contract provisions were...
Perhaps the JDB had a clause along the lines of insisting that Prosper repurchase any loans that turn out to be a case of identity theft.

http://www.prospers.org/forum/shouldnt_we_have_had_an_update_from_doug_fuller_by_now-t7466.0.html;msg117650#msg117650
Logged
If you're not outraged, you're not paying attention.

mothandrust

  • Hero Member
  • *****
  • Karma: +557/-1311
  • Posts: 17369
  • Whistleblowers ask for it by name!
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #43 on: June 02, 2008, 03:45:37 am »

How is a charge off acceptable?  What does that get us? 

I think it may be an excellent thing.  Present system wasn't working.

I hope that what "charge off" means is that they will now consider the entire loan due, not just a few payments, and will therefore commission whoever is going to do the collecting from that point (inside or outside) to collect the ENTIRE loan amount, and make their compensation therefore be a percentage of that entire loan amount instead of a percentage of a few payments.  This is necessary to fund an appropriate final collection process.  See the discussion of this in my "open letter #2" to prosper.

Sure, there are some legal details in the way, and Prosper's lawyers have been stupid about drafting the documents, and revising them when they knew changes were needed, aren't helping now by figuring out a way to properly proceed, and so forth, but I don't think that's Doug's fault.

Adaptation is necessary.  Present system wasn't working.

So now Prosper can call up a borrower who has a 10K loan that went bad and say, "Hey, I hear you have this $1200 stimulus check coming next week.  How about you send us the $1200 and we'll consider your 10K debt payed in full." 

Lenders here will be overjoyed, since they will be getting 6.67 cents on the dollar, higher than the what the JDB was offering.  (Okay, so it's really 8.33 cents on the dollar, but shouldn't Prosper get a 20% cut for its hard work and diligence?  Lenders were saying they didn't mind paying AmSher 17% if they could get a payment, so it's the same idea).

I'd rather get 1.5 cents on the dollar and have Prosper honor its agreements than be given a promise for more where there is no accountability.

Present system wasn't working.  Agreed.  One way to fix that is to:

(1) Sell all the 4+ loans at the market price, since that is required under the LRA in effect when lenders bid and the loans were originated.  Honor current agreements.

(2) Change the LRA and prominently announce the change--that Prosper reserves the right to accept the LRA price or pursue its own post-charge-off collection techniques.

(3) For the next quarterly debt sale, the bad loans were probably all made under the old LRA, so sell those at the best market price.  Be transparent.

(4) For the next quarterly sale after that one, get bids from the JDB's just like before.

(5 When the JDB bids are known, take a poll on the Lender Forum and ask lenders if Prosper should a. Sell at the best offered price (xx cents on the dollar) or b. Use Post-Charge-Off Collection Techniques (which Prosper hopes will get more).

The poll could be structured so that lenders who have more $$$ in 4+ lates could be given more voting power than someone who has just one bad snickers--this might take a couple hours of programming time for someone.
Logged
"I only see two outcomes in this race. One, I win. Or, two, someone else wins and takes the vast majority of my ideas into the White House"--Andrew Yang, entrepreneur, futurist, 2020 Presidential Candidate

xraider

  • Hero Member
  • *****
  • Karma: +0/-0
  • Posts: 6805
    • View Profile
Re: Prosper debt sale crashes and burns
« Reply #44 on: June 02, 2008, 06:18:28 am »

I think that Prosper should be very specific about what these post charge off techniques are, who will apply them, and what it will cost to lenders.  Also, what the end game is... at some point when the loans are even older will Prosper try to sell them again?  Given that debt too old to sue on gets $.75/dollar, are we looking at Prosper or its agent applying these techniques for five years then selling?

What would Prosper consider a fair return to lenders on these?  There's no third party setting the price, so no accountability here. 

What if, during the application of these post charge off techniques, Prosper discovers identity theft?  Will it report that to the impacted lenders and repurchase the loan?

If it's Prosper doing this, what incentive does it have to do it right, or at all?  The New Agency Test lawsuits aren't being litigated but instead appear to be lying dormant.  Why should we think Prosper's treatment of these charge offs will be prompt, aggressive and appropriate?

Frankly, does anyone here trust Prosper with the above?

And, the LRA doesn't give Prosper the right to do this.

For all of these reasons, I think that Prosper must give lenders the ability to opt in or opt out of this Second New Agency Test, just as it did with the first. 
« Last Edit: June 02, 2008, 06:20:34 am by xraider »
Logged
Prosper missed me.  They lifted my suspension a day early.
Pages: 1 2 [3] 4 5 ... 7   Go Up