DTI Uproar

There was some uproar on the lender side when Prosper changed the listings to lump all debt-to-income numbers great than 100% in a >100% category. John Witchel took to his blog to defend the decision.

There is no material difference between 2345235% DTI and 2345236%, agreed? So any variation of the statement "more granularity is always better" is simply false (except in some abstract tautological sense). What we're talking about is degrees of precision and at *some* cut off point between 20% and 2345235% it doesn't matter -- it's all the same. Our analysis led us to conclude based on Prosper's bidding history, historical underwriting criteria and the collective opinion of a whole lot of folks 'round here is that line is 100%.

Being inquisitive, I took to the spreadsheet to see if he was making sense. First, lets look at the number of loans issued and their respective DTIs. It's importing to note that these stats only work for loans where DTI was listed.

DTI Rate	Number Of Loans
0% - 10%	2864
10% - 20%	3640
20% - 30%	1873
30% - 40%	964
40% - 50%	508
50% - 60%	228
60% - 70%	114
70% - 80%	58
80% - 90%	40
90% - 100%	26
100% - Infinity	273

That's right. 273 loans out of 10588 (2.58%) would've had their listings affected. Slim picking to get upset about. Prosper gets a pass on this one in my book.