Tuesday, October 23, 2007

Distress Rate Widens For High Dollar Loans

While doing a regular update on my personal lending tables (interest rates to charge versus various credit criteria), I noticed that the distress rate penalty for high dollar loans (>= $10k) has increased dramatically in the last two months. Distress rates refer to loans that are late in any possible way, either 15 days, 1-3 months, 4+ months, or in default.

In August, I calculated the following distress rates for loans under $10k and over $10k.


AAA
B
C
D
E
HR
Loans Under $10k
0.15%1.44%2.44%4.12%4.97%10.35%19.51%
Loans Over $10k
2.30%2.78%5.10%5.73%5.88%10.00%25.00%
Spread
2.15%1.33%2.66%1.62%0.91%-0.35%5.49%

This has changed significantly in October.

AAA
B
C
D
E
HR
Loans Under $10k
0.46%2.91%3.69%5.42%7.69%17.53%31.85%
Loans Over $10k
4.18%5.24%6.33%11.51%15.25%17.39%33.33%
Spread
3.72%
2.33%
2.65%
6.09%
7.57%
-0.14%
1.48%

3 comments:

Jeff S. said...

Prosper is toast. It's sad to see what has happened. This time last year I thought Prosper coul be the real deal.

Mike said...

My view is that Prosper is at a point of inflection where they can either improve the problems (collections, borrower & lender education and statistics) or not. If they do not rise to the challenge, I will agree with you that they're in trouble.

hokieperogi said...

You can count me as former lender at Prosper who is pulling his money out. Ever so slowly though. You're better off laddering CD's if you want to lock your money up for 3 years at a time. At least with CD's the risk are minimal if not nonexistent.