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Author Topic: Prosper officially files with the SEC  (Read 55046 times)

bamalucky

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Re: Prosper officially files with the SEC
« Reply #15 on: December 05, 2008, 06:44:26 pm »

Q:               What if Prosper were to go out of business?

 

A:                No new borrower loans would be created and, we would assign our servicing obligations to a suitable third party loan servicer.  All existing Notes would be serviced to completion by such third party loan servicer.  The third party loan servicer would take over the administrative responsibilities related to the Notes such as the collection and transfer of monthly payments, providing timely payment notices, monthly lender member statements and required tax documentation, overseeing the collection of delinquent Notes on behalf of the lender members, and reporting payment performance to consumer reporting agencies.  We are in ongoing negotiations with a loan servicing company who is willing and able to transition servicing responsibilities in the event we can no longer do so.  The third party is a financial services company who has extensive experience and knowledge entering into successor loan servicing agreements.  As well, they will provide monthly investor reports on our loan servicing activity that will be available to all registered users.  Contract negotiations are ongoing and we expect our service contract to be finalized by December 31, 2008.
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onthefence

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Re: Prosper officially files with the SEC
« Reply #16 on: December 05, 2008, 06:49:43 pm »

While the SEC is reviewing Prosper's registration, it might be worth while to send a letter to the regulators outlining some of the more troubling issues with Prosper.

This isn't meant to kill Prosper's chances of getting approved so much as it is an opportunity to have the regulators address behaviors of Prosper that appear to have be deceptive.

The up side to this would be that Prosper would be more likely to fix their behavior if questioned by the SEC & we might end up with a better product.
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bamalucky

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Re: Prosper officially files with the SEC
« Reply #17 on: December 05, 2008, 06:50:15 pm »

While we will repurchase Notes in limited circumstances, such as material default on the corresponding borrower loan resulting from verifiable theft of a borrower’s identity, or resulting from the failure of the corresponding borrower loan to comply at origination in material respects with applicable federal and state law, we are not obligated to repurchase a Note from you if your investment is not realized in whole or in part due to fraud
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onthefence

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Re: Prosper officially files with the SEC
« Reply #18 on: December 05, 2008, 06:51:40 pm »

Q:               What if Prosper were to go out of business?

A:                No new borrower loans would be created and, we would assign our servicing obligations to a suitable third party loan servicer.  All existing Notes would be serviced to completion by such third party loan servicer.  The third party loan servicer would take over the administrative responsibilities related to the Notes such as the collection and transfer of monthly payments, providing timely payment notices, monthly lender member statements and required tax documentation, overseeing the collection of delinquent Notes on behalf of the lender members, and reporting payment performance to consumer reporting agencies.  We are in ongoing negotiations with a loan servicing company who is willing and able to transition servicing responsibilities in the event we can no longer do so.  The third party is a financial services company who has extensive experience and knowledge entering into successor loan servicing agreements.  As well, they will provide monthly investor reports on our loan servicing activity that will be available to all registered users.  Contract negotiations are ongoing and we expect our service contract to be finalized by December 31, 2008.


So did Prosper LIE to us about having this set up?  It obviously has not been done yet.
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bamalucky

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Re: Prosper officially files with the SEC
« Reply #19 on: December 05, 2008, 06:52:29 pm »

Quote
Your Prosper funding account represents an interest in a pooled bank account that does not earn interest.

I thought we all had individual accounts?
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bamalucky

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Re: Prosper officially files with the SEC
« Reply #20 on: December 05, 2008, 06:53:49 pm »

My favorite part

Quote
As a result of our prior operations, our lender members who hold these loans may be entitled to rescind their purchase and be paid their unpaid principal amount of the borrower loans plus statutory interest.  In addition, As of September 30, 2008, the aggregate principal balance of loans purchased through our platform by purchasers not affiliated with Prosper was $178.6 million.
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bamalucky

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Re: Prosper officially files with the SEC
« Reply #21 on: December 05, 2008, 06:55:17 pm »

We currently do not have any arrangement for backup servicing, however, we are in ongoing negotiations with a loan servicing company willing and able to undertake our servicing responsibilities in the event we can no longer do so.  Contract negotiations are ongoing and we expect our service contract to be finalized by December 31, 2008.  If our platform fails or we became insolvent, we would attempt to transfer our loan servicing obligations to this third party back-up servicer.  There can be no assurance that this back-up servicer will be able to adequately perform the servicing of the outstanding borrower loans.  If this back-up servicer assumes the servicing of the borrower loans, the back-up servicer may impose additional servicing fees, reducing the amounts available for payments on the Notes.  Additionally, transferring these servicing obligations to our back-up servicer may result in delays in the processing and recovery of information with respect to amounts owed on the borrower loans or, if our platform becomes inoperable, may prevent us from servicing the borrower loans and making principal and interest
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onthefence

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Re: Prosper officially files with the SEC
« Reply #22 on: December 05, 2008, 06:58:35 pm »

Quote
The Notes will be special, limited obligations of Prosper only and not obligations of any borrower.  The Notes are unsecured and holders of the Notes do not have a security interest in the corresponding borrower loans or the proceeds of those corresponding borrower loans

It sounds like Prosper 2.0 is clearly stating that 'Lenders' won't own the notes.  If Prosper tanks, lenders would have to stand in line with all the other creditors.
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Fred93

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Re: Prosper officially files with the SEC
« Reply #23 on: December 05, 2008, 06:58:59 pm »

While the new S1 is a very professional effort, and will probably be approved, it contains powerful weasel-words.  Some examples follow.

We all know that Prosper's lame efforts at collections are a very serious problem.  I described it as a symptom of the more general "principal/agent" problem in my ancient open letter to prosper.  Have they made any effort to do something about this?  No.  In fact, they have instead institutionalized the idea that doing almost nothing is ok, by explicitly saying in the S1 that they will do almost nothing!

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We are obligated to use commercially reasonable efforts to service and collect the borrower loans, in good faith, accurately and in accordance with industry standards customary for servicing loans such as the borrower loans.

Ok, gee, that's a reasonable start.  "commercially reasonable efforts"... wonder what that means.  Don't have to wonder long.  They define it pronto.

Quote
If we refer a delinquent borrower loan to a collection agency on or after the 31st day of its delinquency, that referral shall be deemed to constitute commercially reasonable servicing and collection efforts.

Whoa!  Just the act of sending the loan to a collection agency satisfies their entire obligation with regard to collections!  How conveeeenient.  They don't take any responsibility for selecting, paying, checking up on, managing the collection agency, or otherwise ensuring that anything at all is actually done.  Later they can say "Hey, we refered that loan to the XYZ collection agency.  If they didn't do anything, like they didn't call the borrower or anything, hey that's not our fault.  We satisfied our obligation as specfied in the prospectus."

That's really weak.

I think the next sentence may have been an attempt to do something right, or maybe not.  It isn't clear because of the poor (ambiguous) english.  This sentence should be used as an example in a law school class on how to draft ambiguous sentences.

Quote
Furthermore, we may, at any time and from time to time, amend or waive any term of a borrower loan, and may transfer, sell or cancel any borrower loan that is more than 120 days delinquent without the consent of any holder of any Notes of the series corresponding to such borrower loan.

Do you think the "120 days" applies to both the red and blue parts of this sentence, or just the blue part?  If it applies to both, it is good.  If it applies to just the blue part, then they have reserved the right to change any terms of any loan at any time, which is not so good.

bamalucky

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Re: Prosper officially files with the SEC
« Reply #24 on: December 05, 2008, 07:00:07 pm »

Quote
For example between September 1, 2007 and August 31, 2008, we verified employment and income for only approximately 22.6% of borrowers.

Quote
Of the borrowers undergoing income verification for the period from September 1, 2007 to August 31, 2008:

 

·                  approximately 56.7% provided us with satisfactory responses and received a borrower loan;

 

·                  approximately 37.7% did not provide satisfactory responses, or did not respond, and their listings were cancelled; and

 

43



 

·                  approximately 5.9% either withdrew their listings, or failed to receive bids totaling the amount of their requested loan.
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bamalucky

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Re: Prosper officially files with the SEC
« Reply #25 on: December 05, 2008, 07:02:10 pm »

So almost half the borrowers were probably scammers & were caught..They let 80% of the loans go even though they knew 45% were possible frauds
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Fred93

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Re: Prosper officially files with the SEC
« Reply #26 on: December 05, 2008, 07:06:18 pm »

Quote
For example between September 1, 2007 and August 31, 2008, we verified employment and income for only approximately 22.6% of borrowers.

Quote
Of the borrowers undergoing income verification for the period from September 1, 2007 to August 31, 2008:
  • approximately 56.7% provided us with satisfactory responses and received a borrower loan;
  • approximately 37.7% did not provide satisfactory responses, or did not respond, and their listings were cancelled; and
  • approximately 5.9% either withdrew their listings, or failed to receive bids totaling the amount of their requested loan.

OMG!  Just over half were able to withstand income verification.  That means almost half of the borrowers lie about income.  Egad.  If that's true, then we need income verification on 100% of loans. 

Edited to add: Heh heh... This could explain why DTI has been such a poor indicator of loan performance.  It is a bogus number on about half of the loans!  That would tend to decorrelate your statistics.
« Last Edit: December 05, 2008, 07:09:20 pm by Fred93 »
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onthefence

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Re: Prosper officially files with the SEC
« Reply #27 on: December 05, 2008, 07:06:35 pm »

Quote
From the launch of our platform in February of 2006 until October 16, 2008, the operation of our platform differed from the structure described in this prospectus, and we did not offer Notes.  Instead, our platform allowed lender members to purchase, and take assignment of, borrower loans directly.

It sounds like Prosper is reconfirming that Lenders did in fact purchase fractions of the loans.  This will no longer be the case in the future.  Buyer beware.
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bamalucky

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Re: Prosper officially files with the SEC
« Reply #28 on: December 05, 2008, 07:07:06 pm »

This is funny

Quote
We consider fraud detection to be of utmost importance to the successful operation of our business.  We employ a combination of proprietary technologies and commercially available licensed technologies and solutions to prevent and detect fraud.  We employ techniques such as knowledge based authentication, or KBA, out-of-band authentication and notification, behavioral analytics and digital fingerprinting to prevent identity fraud.  We use services from third-party vendors for user identification, credit checks and OFAC compliance.  In addition, we use specialized third-party software to augment our identity fraud detection systems.  In addition to our identity fraud detection system, we have a dedicated team which conducts additional investigations of cases flagged for high fraud risk.
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bamalucky

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Re: Prosper officially files with the SEC
« Reply #29 on: December 05, 2008, 07:09:35 pm »

How do you like me now?
How do you like me now,
Now that I'm on my way?
Do you still think I'm crazy
Standin here today?

http://www.azlyrics.com/lyrics/tobykeith/howdoyoulikemenow.html

Quote
On November 26, 2008, plaintiffs, Christian Hellum, William Barnwell and David Booth, individually and on behalf of all other plaintiffs similarly situated, filed a class action lawsuit against us, certain of our executive officers and our directors in the Superior Court of California, County of San Francisco, California.  The suit was brought on behalf of all loan note purchasers in our online lending platform from January 1, 2006 through October 14, 2008.  The lawsuit alleges that Prosper offered and sold unqualified and unregistered securities in violation of the California and federal securities laws.  The lawsuit seeks class certification, damages, the right of rescission and the award of attorneys’ fees and costs against Prosper and the other named defendants.  We intend to vigorously defend this lawsuit, however, the final outcome of this lawsuit is not presently determinable or estimable and there can be no assurance that the matter will be finally resolved in our favor.  If the lawsuit is not resolved in our favor, we might be obliged to pay damages, and might be subject to such equitable relief as a court may determine.

 
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