Friday, October 5, 2007

Prosper Confirms Upcoming Lender Features

Earlier today I pointed to a Yahoo financial article that referred to several features that weren't currently available on the Prosper site. It turns out that these features were previewed by Prosper at the Finovate 2007 conference in NYC this last week and the Yahoo article was based on Prosper's presentation at the conference.

Prosper was kind enough to confirm the upcoming features were presented at the Finovate conference. The first major feature will show lenders the estimated default rate based on Prosper's default information (not Experian's) when lenders bid on on listings. The second major feature will allow lenders to assemble a loan portfolio to help control risk in their lending.

Prosper Andrew was kind enough to answer a few questions about the upcoming features.

Mike @ Prosperous Land: Will the estimated default rates be shown when lenders click on the "Bid" button in something similar to the current warning on E/HR loans?

Prosper Andrew: Yes, it will be shown on the bidding page, and will actually be shown on every single listing (unlike the current E/HR warning). So good listings (AA, 0 DQs, etc.) will have a very low estimated default rate, and very poor listings (HR, multiple DQs, etc.) will have a very high estimated default rate. As always, it will be up to the lender to decide whether the level of risk is appropriate to his or her lending strategy.

Mike @ Prosperous Land: Have you settled on which credit criteria will be used to bin the loans for analysis? I've noticed that the criteria can only be sliced so thin before there's not enough loans to do a good extrapolation.

Prosper Andrew: You’re on the right track with this, and yes, we’ve settled on the criteria. Basically, using public data, for each credit grade, we’ve determined which credit factors contribute most to risk, and used those to slice up the borrower population. There are about 50 slices across all 7 credit grades. Some grades have fewer slices (AA has 3, for example), and some have more.

Mike @ Prosperous Land: The Yahoo article suggested that you could base the criteria on whether they're a recent college graduate. Loan categories like "recent college grad" sound like self-reported information. Isn't that a bid dodgy?

Prosper Andrew: Yeah, this is probably just a misunderstanding on the Yahoo author’s part. We are only using quantitative data like credit grade, delinquencies, inquiries, and stuff like that.

Mike @ Prosperous Land: Will Prosper do automatic bidding based on the portfolio or will it provide guidance as to how a listing fits into the portfolio?

Prosper Andrew: It will be similar to the way standing orders work, where listings that meet the portfolio plan’s criteria get bids.

Mike @ Prosperous Land: The portfolio planner sounds similar to features provided by Lending Club's portfolio system. Are there features that differentiate Prosper's implementation?

Prosper Andrew: It’s fairly different, actually. LendingClub’s tool just lets you take your money, choose a risk level, and actually places your money at the very moment in what’s available now. Our tool will offer 4 pre-defined plans that offer different levels of risk and return, and will basically set you up with a standing order that places bids on listings that meet the plan over time. So your money could be bid immediately (like LC’s tool), or it could be placed over time as more listings that match the plan are created.

Mike @ Prosperous Land: When can we expect these features to roll out?

Prosper Andrew: it will be over the next few months. And we’ll roll these features out in phases, so you might see some functionality now, then more later.

Thanks to Prosper Andrew for taking time to clarify the new features.

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