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Author Topic: Prosper officially files with the SEC  (Read 32287 times)

Fred93

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Re: Prosper officially files with the SEC
« Reply #75 on: December 06, 2008, 02:11:44 am »

OMG!  Just over half were able to withstand income verification.  That means almost half of the borrowers lie about income. 

That doesn't follow. 

It is the best extrapolation I can make with the data available.


Quote
Prosper didn't randomly select listings for verification.  It utilized a system intended to ferret out the higher risk listings.  Of course, given Prosper's general ineptitude, its system probably wasn't very good.

You're right.  But without knowing more I have to be skeptical of their secret-selection-criteria.  Even if their selection technique had MODERATE success, that "about 50%" number is so high to make it very unlikely that they had a good result.  Any selection criteria is a dull instrument.  Sure, if some guy has HR credit and claims to make $1 Million/year, you ask him if he can verify that.  Those don't come along very often.  Routine cases are not so easy.  Given the fundamental difficulty, we should expect to achieve only moderate selectivity.  If we try, using the up-front numbers, to separate listings into two piles, so that one pile has a high fraction of liars and the other has a low fraction of liars, moderate selectivity means you aren't gonna end up with one pile with 50%  liars and the other pile with 1% liars.   That would require a very high selectivity.  So given that we know that one pile (the pile they selected verify) had about 50% liars, what do we know about the other pile?  It ain't gonna have 1% liars.  That would strain credibility.  Would require a nearly perfect selection method.  We've seen no evidence whatsoever about the quality of the selection method.  That second pile might have 50% liars, or 40% liars, or maybe even 10% liars, if you've done a really good job, but it ain't gonna be down at the 1% level.  It doesn't take a very big fraction of liars to screw things up!

Do you wonder why AA loans are going bad at over 5%/year?  

Now if I were an insider in a bank, I could look at all the data, and come to a more informed conclusion, but I'm not on the inside, and the numbers that they've just given us align with what we've been able to conclude by watching loan performance over the past two years: There's a lot of fraud.
« Last Edit: December 07, 2008, 12:05:41 am by Fred93 »
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Fred93

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Re: Prosper officially files with the SEC
« Reply #76 on: December 06, 2008, 02:15:09 am »

Considering that it lost $13.5 million in 2007, I would guess it lost at least that much this year as well.  ...  I also imagine that its legal fees were considerably higher this year than last.   :ninja:  And then there's the $1 million NASAA fine.  All told, it looks like Prosper will begin 2009 with less than $9 million in the bank

There's a table somewhere in the S1 that gives an estimate of the costs of the filing.  Total is around $700,000.  And that's just the filing.  Probably doesn't count negotiating with the states.

ira01

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Re: Prosper officially files with the SEC
« Reply #77 on: December 06, 2008, 02:17:07 am »

Prosper had $23,243,341 on hand on Jan 1 2008.

It's pretty fair to assume they have spent over 10m this year

I'm not done reading, but I work for a non-profit (a graduate school specializing in theology), and we operate on a budget WAYYYYYYYYYYY less than that.  Like, less than $3mil.  We employ 60 people at all levels of skill.

Even if you spent every penny on your employees, that's only $50K per person, including benefits, payroll taxes, unemployment, workers' compensation, etc.  That's very low, and I assume you have some other expenses too.  

The numbers we now see on Prosper's finances are pretty much in line with what a number of us have been estimating here for well over a year.  Just goes to show that there are a lot of smart cookies here.  Too bad Prosper didn't listen to us more back in the day.
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Urbi_et_Orbi

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Re: Prosper officially files with the SEC
« Reply #78 on: December 06, 2008, 02:26:04 am »

Quote
The Company granted 2,500 immediately vested common shares at $2.17 per share to nonemployees for services during the year ended December 31, 2007 and 12,294 immediately vested shares at $0.50 per share in 2006.  Expense of approximately $5,400 and $6,100 was recognized in 2007 and 2006, respectively

Who are you?

Rateladder?  Islandmele??

Early group leaders?

onthefence

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Re: Prosper officially files with the SEC
« Reply #79 on: December 06, 2008, 06:59:37 am »

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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.

Even without the class action lawsuit, IMHO this makes Prosper (like LC) wholly unsuitable as an investment.  But if Prosper 2.0 manages to debut before the class action concludes, one would have to be the dumbest person on the face of the planet to participate as a lender -- the class action will probably bankrupt Prosper, so all of the money 2.0 borrowers repay monthly on their loans would get sucked up by the 1.0 lenders and their counsel.  :ninja:

Since Prosper 2.0 will own new debts obligations, what do you think the odds are that Prosper 2.0 will attempt to borrow against them to stay afloat?  Think how scary that possibility would be for 2.0 Lenders.
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112233

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Re: Prosper officially files with the SEC
« Reply #80 on: December 06, 2008, 10:11:09 am »

OMG!  Just over half were able to withstand income verification.  That means almost half of the borrowers lie about income. 

That doesn't follow. 

It is the best extrapolation I can make with the data available.


Quote
Prosper didn't randomly select listings for verification.  It utilized a system intended to ferret out the higher risk listings.  Of course, given Prosper's general ineptitude, its system probably wasn't very good.

But without knowing more I have to be skeptical of their secret-selection-criteria.  Even if their selection technique had MODERATE success, that "about 50%" number is so high to make it very unlikely that they had a good result.  Any selection criteria is a dull instrument.  Sure, if some guy has HR credit and claims to make $1 Million/year, you ask him if he can verify that.  Those don't come along very often.  Routine cases are not so easy.  Given the fundamental difficulty, we should expect to achieve only moderate selectivity.  If we try, using the up-front numbers, to separate listings into two piles, so that one pile has a high fraction of liars and the other has a low fraction of liars, moderate selectivity means you aren't gonna end up with one pile with 50%  liars and the other pile with 1% liars.   That would require a very high selectivity.  So given that we know that one pile (the pile they selected verify) had about 50% liars, what do we know about the other pile?  It ain't gonna have 1% liars.  That would strain credibility.  Would require a nearly perfect selection method.  We've seen no evidence whatsoever about the quality of the selection method.  That second pile might have 50% liars, or 40% liars, or maybe even 10% liars, if you've done a really good job, but it ain't gonna be down at the 1% level.  It doesn't take a very big fraction of liars to screw things up!

Do you wonder why AA loans are going bad at over 5%/year?  

Now if I were an insider in a bank, I could look at all the data, and come to a more informed conclusion, but I'm not on the inside, and the numbers that they've just given us align with what we've been able to conclude by watching loan performance over the past two years: There's a lot of fraud.

I wonder how my 2nd listing was ferreted out by prosper for verification. I paid 80% of my 1st loan in 13 months w/no lates, the 2nd loan was 20% the amount of the 1st, and nothing changed in my profile (address, income, place of work, credit grade, etc).

msava

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Re: Prosper officially files with the SEC
« Reply #81 on: December 06, 2008, 10:34:29 am »

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.
They lied. That was one of the first questions I asked BEFORE plopping down my hard earned money. In the old fauxums that issues was addressed many times.
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112233

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Re: Prosper officially files with the SEC
« Reply #82 on: December 06, 2008, 10:40:26 am »

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.
They lied. That was one of the first questions I asked BEFORE plopping down my hard earned money. In the old fauxums that issues was addressed many times.
yes, "ongoing negotiations" probably means "we sent an email to this person we know before we filed this document. he hasnt replied yet so we are in ongoing negotiations"

traveler505

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Re: Prosper officially files with the SEC
« Reply #83 on: December 07, 2008, 02:08:28 pm »

I don't know if anyone has pointed this out, but Lending Club (which appears to be using the same Note structure that Prosper is adopting under the new S-1) is filing supplemental documents with the SEC on a daily basis.  Each day's supplement to the prospectus lists the loans available to be bid on, with credit data, descriptions, etc.  Here's an example:

http://www.sec.gov/Archives/edgar/data/1409970/000140997008000079/postingsup_20081205.htm

Presumably, Prosper will have to do the same.  (So much for the "privacy concerns" that led Prosper to shut down access to credit data for anyone other than registered lenders.)

Years ago, cellardoor and I had a private discussion (sparked by a cryptic comment that I made on the forums) where I speculated that Prosper was trying to avoid registration with the SEC because of the burden of making a separate SEC filing for each loan.  (Since each loan has different risks and benefits, a single filing wouldn't provide adequate disclosure.)  Obviously, I over-estimated the burden of this requirement (since the supplements are brief and appear to become effective immediately without delays due to SEC review), but at least I was in the ballpark.

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beerbud1

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Re: Prosper officially files with the SEC
« Reply #84 on: December 07, 2008, 02:20:40 pm »

I don't know if anyone has pointed this out, but Lending Club (which appears to be using the same Note structure that Prosper is adopting under the new S-1) is filing supplemental documents with the SEC on a daily basis.  Each day's supplement to the prospectus lists the loans available to be bid on, with credit data, descriptions, etc.  Here's an example:

http://www.sec.gov/Archives/edgar/data/1409970/000140997008000079/postingsup_20081205.htm

Presumably, Prosper will have to do the same.  (So much for the "privacy concerns" that led Prosper to shut down access to credit data for anyone other than registered lenders.)

Years ago, cellardoor and I had a private discussion (sparked by a cryptic comment that I made on the forums) where I speculated that Prosper was trying to avoid registration with the SEC because of the burden of making a separate SEC filing for each loan.  (Since each loan has different risks and benefits, a single filing wouldn't provide adequate disclosure.)  Obviously, I over-estimated the burden of this requirement (since the supplements are brief and appear to become effective immediately without delays due to SEC review), but at least I was in the ballpark.


I clicked on that link and by using that, Prosper would no longer be able to shield information from Lenders Like City, Employer, credit score, etc.. It's all there in the Sec filing.
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Mark12547

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Re: Prosper officially files with the SEC
« Reply #85 on: December 07, 2008, 02:43:58 pm »

... Prosper would no longer be able to shield information from Lenders Like City, Employer, credit score, etc.. It's all there in the Sec filing.

I had speculated that Prosper would never like the degree of transparency the SEC would require. But at that time I was thinking of performance data. It hadn't occurred to me that the new notes would become Prosper unsecured debt and thus we would need information on Prosper's own financials; or that borrower's credit, job and demographic information would become public knowledge (whereas just before the "quiet period" a subset of that information was available to only registered lenders).

I think we will see a clash of regulations here: the need to disclose relevant information on securities for Note Purchasers (a.k.a., "Lenders") vs. privacy of borrower information. Maybe borrowers can agree to waive a certain amount of privacy to list on Prosper, maybe not. In any case, I doubt that we have seen the last of regulatory hurdles, either on Prosper or on Lending Club. Plus the required transparency for investors (Note Purchasers a.k.a., "Lenders") is an anathema to Prosper's corporate structure.
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ira01

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Re: Prosper officially files with the SEC
« Reply #86 on: December 07, 2008, 02:47:44 pm »

I don't know if anyone has pointed this out, but Lending Club (which appears to be using the same Note structure that Prosper is adopting under the new S-1) is filing supplemental documents with the SEC on a daily basis.  Each day's supplement to the prospectus lists the loans available to be bid on, with credit data, descriptions, etc.  Here's an example:

http://www.sec.gov/Archives/edgar/data/1409970/000140997008000079/postingsup_20081205.htm

Presumably, Prosper will have to do the same.  (So much for the "privacy concerns" that led Prosper to shut down access to credit data for anyone other than registered lenders.)

Years ago, cellardoor and I had a private discussion (sparked by a cryptic comment that I made on the forums) where I speculated that Prosper was trying to avoid registration with the SEC because of the burden of making a separate SEC filing for each loan.  (Since each loan has different risks and benefits, a single filing wouldn't provide adequate disclosure.)  Obviously, I over-estimated the burden of this requirement (since the supplements are brief and appear to become effective immediately without delays due to SEC review), but at least I was in the ballpark.

I clicked on that link and by using that, Prosper would no longer be able to shield information from Lenders Like City, Employer, credit score, etc.. It's all there in the Sec filing.

And the exact (claimed) gross income, too.  Remember how Prosper always refused to provide more granularity than "$1-$24,999," "$25,000-$49,999," etc.?  What a bunch of morons they are. 

Although this extra information would be good for lenders (and would enable forum detectives to identify a lot more borrowers for googling), it doesn't even come close to balancing out the increased negatives of Prosper 2.0, including the big one -- that Prosper will own the loans, and lenders will be mere unsecured creditors of Prosper.
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112233

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Re: Prosper officially files with the SEC
« Reply #87 on: December 07, 2008, 03:20:35 pm »

well, I dont see anything in their financial statements that suggest they made any money on the float of lender's money. That was a hot issue once.

ira01

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Re: Prosper officially files with the SEC
« Reply #88 on: December 07, 2008, 03:48:17 pm »

well, I dont see anything in their financial statements that suggest they made any money on the float of lender's money. That was a hot issue once.

I always thought that was unlikely.  Of course, they might get a reduced rate on ACH transfers or other banking services as a result of keeping that big pot of lender money at WF.
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DakotahFury

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Re: Prosper officially files with the SEC
« Reply #89 on: December 07, 2008, 04:22:20 pm »

My biggest shock is 22% of loans were verified & 45% of those were canceled by PMI.

Doesn't anyone else see a need to verify 100% of loans?

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Holy crap...that is an astonishing, shocking, and infuriating figure.  :o
If you were a factory manager, and 45% of the products you QC'd were faulty...how could you justify NOT checking every single product that went out the door? Heck, how could you justify not shutting down the line and looking for ways to structurally change the way you were going about business?

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