So Why The Weak February Loan Numbers?

After a strong showing in January, Prosper's monthly loan totals have dropped to about $5.7 $5.9 million. With this disappointing return, I started digging through the loan activity to find some likely culprits. I think Prosper is having problems delivering borrowers. As anyone who's tried to bid in the last month can attest, there's brutal competition in the auctions. It feels like there's lots of money chasing too few loans. Fortunately, there's some statistical backup.

First, Lending Stats tracks membership growth as well as active membership and February was not a good month for finding borrowers. February showed 5.04k active borrowers versus 8.29k in January, and Prosper only added 3.97k new borrowers in February versus 8.01k in January. Those are huge drops in borrower numbers, making me wonder how they managed to hit $5.7 M.

Second, Prosper has emphasized portfolios to lenders, and all evidence is that any loan that fits into a portfolio slice is getting snapped up and fully funded in less than a day. Just looking at the 6 slices in the Balanced portfolio (the Feb 27 version), there is not one loan that meets the portfolio criteria that isn't already 100% funded and at the minimum portfolio interest rate.

Slice 1	Credit grade: AA Debt to income ratio: ≤40% Loan amount: ≤$9,999.99 Automatic funding: Only Now delinquent: 0 delinquent accounts	Loan Search
Slice 2	Credit grade: AA Debt to income ratio: ≤40% Loan amount: $15,000.00+ Automatic funding: Exclude Now delinquent: 0 delinquent accounts Public records: 0 in last 10y Inquiries in last 6m: 0-1 inquiries	Loan Search
Slice 3	Credit grade: A Debt to income ratio: ≤40% Loan amount: $7,500.00-$14,999.99 Automatic funding: Exclude Now delinquent: 0 delinquent accounts Inquiries in last 6m: 0-1 inquiries	Loan Search
Slice 4	Credit grade: B Loan amount: ≤$7,499.99 Automatic funding: Exclude Now delinquent: 0 delinquent accounts Inquiries in last 6m: 0-2 inquiries	Loan Search
Slice 5	Credit grade: C Debt to income ratio: ≤40% Loan amount: ≤$7,499.99 Automatic funding: Exclude Now delinquent: 0-2 delinquent accounts Inquiries in last 6m: 0 inquiries	Loan Search
Slice 6	Credit grade: C Debt to income ratio: ≤40% Loan amount: ≤$7,499.99 Automatic funding: Exclude Now delinquent: 0 delinquent accounts Inquiries in last 6m: 1-2 inquiries	Loan Search

I am concerned that Prosper's recent hike in the origination fees pushed away otherwise solid borrowers. Prosper's income is up, but it's hard going for their lenders. Therefore, Prosper's March mission, if they choose to accept it, is to bring in the borrowers.

Note: There have been some hiccups in the Prosper XML data which have probably prevented Lending Stats from updating it's Loan Funded statistics. Their loan amount numbers are a few days old. The same could be said about their active borrowers numbers, but it would take a statistically improbable rush of new borrowers to change my conclusions.

Update: Prosper's final Feb numbers came in at $5.9M. Better than my original swag of $5.7M, but well short of January.

Prosper API Getting Fixed

Another e-mail showing progress in repairing bugs in the API and XML interface for developers (it's not working very well at the moment).

Dear So-and-so,

Thank you for your patience while we have been working through the recent API and XML issues.

The web service API has been re-enabled and we are monitoring it closely. You may notice that the Prosper calculated ROI numbers are temporarily unavailable. We apologize for any inconvenience this may have caused you and are committed to making the ROI numbers available via the XML. We are still running down the issue.

The problems with the XML data have been tracked to the source but have not been corrected yet. We hope to have this corrected soon.

Sincerely,

Prosper

API Problems For Prosper

This just appeared in my e-mail box

Dear So-And-So,

Prosper is experiencing two issues that may be affecting your applications and code.

1. The web service API has been temporarily disabled due to a performance issue.

2. The XML data dump has at least one illegal character in it.

We do not currently have an estimated time for the fix, however we are actively working to resolve both issues quickly as it is impacting many customers.

Sorry for the inconvenience and we appreciate your patience.

Sincerely,

Prosper

In other words, I wouldn't start using RateLadder's automatic sniping program just yet.

Can I Have My Old Performance Interface Back?!

I'm sure they meant well with the change, but Prosper's new and shiny marketplace performance user interface is ticking me off. It now takes me 5 times as long to perform a searches and iterations as it used to, and, as a result, I'm bidding less because it takes too long. Admittedly, I'm conservative and always double check the performance based on a loan's actual criteria instead of taking the bidding guidance as gospel, but this just hurts.

The old flow was simple

• Bring up Marketplace Performance webpage
• Click "Edit Criteria"
  
• Fill in details
• Click "Recalculate"

The new flow takes much longer

• Bring up Marketplace Performance webpage
• Click "Edit Criteria"
  
• Click "Add/Remove Criteria"
• Search for and eventually click several times to pick all the criteria
• Click "Done"
• Realize that I forgot one of my criterion
  
• Click "Add/Remove Criteria"
• Search for and eventually click to pick all the forgotten criteria
• Click "Done"
• Fill in details
• Click "Recalculate"
• Realize I forgot to fill in the details for one criterion so it disappeared from the data entry window
  
• Click "Edit Criteria"
  
• Click "Add/Remove Criteria"
• Search for and eventually click to add the criteria back
  
• Click "Done"
• Fill in details
• Click "Recalculate"

So, can I please have the old, plain-Jane HTML forms based interface back?

Head 'Em Up, Move 'Em Out, Prosper Days, Linkfest!

I promise you, the title is much cooler when the Blues Brothers sing it. And on that note, we're into more Prosper Days Linkfest-o-rama-mania. I guess after all this is over I'll have to go back to actually writing about something instead of linking to others. Drat.

Prosper Lending Review

• ABC 7 covers Prosper Days (Video Clip)
  
• Prosper Days 2008 wrap up and a look back to 2007
  

ZCommodore distilled Gogmagogs live-chat (reg required) from Doug Fuller's collections report.

Rateladder: Prosper Days 2008

Wiseclerk: Reports on Prosper Days 2008

Lazy Man & Money: Prosper Days (Day 2 Overview)

Peer To Peer Lending With Prosper

• Prosper’s a-gonna start suing
  
• Payment dates are going to change to improve loan performance
  

j9353's Prosper Experience: Prosper Days 2008 is over now

Microfinance Travels: Prosper Days

Elaine Vigneault: Initial Thoughts - Prosper Days

SF Business Times: Prosper CEO sees company benefiting from credit crunch

NetBanker: Prosper Helps Borrowers Tap the Value of Their "Social Capital"

Interesting Portfolio Date Range

Prosper had an interesting disclaimer on their estimated loss information associated with the portfolio plans.

1 Estimated average annualized loss rate based on the historical performance of Prosper loans for borrowers with similar characteristics, originated between Oct-31-2007 and Oct-31-2007, measured as of Nov-30-2007. Actual performance may differ from estimated performance due to many reasons, for example, worsening economic conditions.

It's either a typo, or that was a great lending day for them. I'm going with it being a typo (2006 - 2007?), but it provided some entertainment for the morning. I need to get out more.

Update: Wow. That didn't take long to get fixed. You'd think Prosper read this blog or something

¹ Estimated average annualized loss rate based on the historical performance of Prosper loans for borrowers with similar characteristics, originated between Jun-01-2006 and Oct-31-2007, measured as of Nov-30-2007.

Vicarious Live-Blogging: Prosper Days

Since I'm not actually at Prosper days, I have to vicariously live-blog from home. Consider this a Prosper Days linkfest. If you're looking for staying up on what's happening, try IRC. I'll post more as the reports roll in (right after the late night party crowd reconnects with their laptops). On to day 1.

Prospers.org: "Live reporting from PD in IRC" thread.

Prosper Lending Review: "Keynote from CEO Chris Larsen"

Prosper Lending Review: "Prosper Days '08 kicks off"

Prosper Marketplace Monitor: "Prosper didn't catch fraudster using its services, but CEO takes credit for conviction"

bamalucky: "The last Prosper Days?"

Update 2:
Lazy Man & Money: "Prosper Days (Day 1 Overview)"

Update: It seems that several people are disappointed that Doug Fuller won't make an appearance at the 10:30 Collections session today. He presented after all (some kind of scheduling snafu). The live-chat makes it sound like one of the most substantial presentations thus far.

Old schedule:

New schedule:

Following Prosper Days

Prosper Days is in full swing in San Francisco. In addition to a number of new features rolled out for PD like user-customizable portfolios, more search criteria, interest rate changes, and a host of other tweaks, attendees get to chew over the minutia of running Prosper. There are no live feeds, so the best way to keep track of what's happening is to venture onto the Prospers.org IRC feed, where a few lenders are live-chatting from Prosper Days. If you're unfamiliar with IRC etiquette, your best bet is to quietly lurk and read the commentary lest you get pounced. This is a no holds barred region of the internet.

End Of FANAFI Junkmail Saga

If you missed out, Jeff of the Prosper group FANAFI Finance and the now closed My Microfinance blog had accused Prosper of selling their personally identifiable information to junk mailers. After some back and forth, Jeff announced a renewed interest in Prosper but would not talk about how the junk mail bruhaha had been resolved. It was just hanging out there.

A few things have happened that have cleared the air for me. First, Jeff did an interview with RateLadder where he addresses, among other things, his accusation:

Recently you had made a claim that Prosper had been selling your contact information. Do you still believe that?
Unfortunately I never had a chance to set the record straight on this one since they haven’t ‘officially’ replied to me. Prosper is not likely the only company possibly divulged our information based upon the following… Catherine has yet to reply to me on the record about their findings. However my ‘other’ contact at Prosper.com has told me that they have not sold our data to any third parties, but if they had it would not include any fictitious data or name such as the one we keep there. It would be nice however to hear this from Catherine (you have my email address, use it). This sort of clears it up enough for me to press on with the events of your next question as I trust my ‘other’ contact without condition… My one wish however… Official contact. I hate using back-channels to get information out of people, especially corporations who should know better.

Next, Prosper did reply to my inquiry into their inquiry and still does not think they're the culprit. Their findings:

• They made contact with the company that was sending junk mail to Jeff and they claimed no knowledge of Prosper.
  
• Prosper does not have "FANAFI Foundation" in any of their databases or records. The group Jeff started was called "FANAFI Financial".
  
• Even if FANAFI Foundation was in their records, junk mailers typically buy individual names and contact information, not group names.
  

My own search showed that at one point in the past, Jeff used "FANAFI_Foundation" as his userID (notice the "_"), and this can be found on Prosper's website. The question, then, relates to what search criteria was used by Prosper.

And finally, Jeff has possibly identified an alternative source of the junk mail, as he has related in an e-mail exchange with me:

... the source of the information has been found to be PayPal.com, which, upon re-inquiry with the company who had called to offer credit to one 'FANAFI Foundation' corrected himself to say that indeed PAYPAL, not Prosper had given them our information (bigger oopsie for those of you who use PayPal.com by the way). We do carry a business account with PayPal.com, but had not made the link until the source of the original data pointed me toward that account. Upon checking, yes, we are indeed registered there with that name, which will be changed to see if the calls and junk mail shift away.

I don't hold back from criticizing Prosper when they do things wrong, but that didn't happen this time. Nothing to see here. Move along.

Prosper Update Right Before Prosper Days

What are the odds of an update to the Prosper website right before Prosper Days?

Maintenance notice: The Prosper site will be taken offline for maintenance at 8:00 PM Pacific, February 21, 2008 and should be back online by 1:00 AM.

I'm sure they're just screwing with us. There's no big updates coming. After all, you have to reboot windows machines every once in a while and they didn't want the website BSODing during Prosper Days demos.

But, just in case Prosper decided to rollout a few cool features for Prosper Days, here's my big feature wishlist:

• Secondary Loan Market: Now lenders can participate in even more auctions. Not only will it increase the liquidity for lenders who feel the need to cash out their loans, but it may end all the complaining about how folks are stuck with their loans for 3 whole years. It will make it even harder to calculate Prosper's income.
  
• Nation-wide Lending @ 36%: Will Prosper follow Lending Club's lead in partnering with a national bank to underwrite loans beyond the state legal limits? They could go one step further and get a national bank charter. There's nothing that makes me more giddy than the possibility of lending money to folks living in Las Vegas, NV. Beyond that joy, it will greatly expand the borrower pool and increase the changes of Prosper being profitable some day.
  
• AJAX: Prosper will AJAX-ify their website, bringing eye candy to the otherwise drab world of banking. Think of it as an upgrade to Web-2.5. The buzzwords will fly.
  
• Search API: I'm hoping for an upgrade to Prosper's developer API to let me run performance search queries on their performance engine without all that pesky web browser getting in the way.
  

Collections To Swap To AmSher Any Day Now (TM)

Now that Prosper has yanked most delinquent loans from Penncro, it's been a waiting game to see when AmSher would actually start attempting collections. And a frustrating one at that. One of Prosper's friendly grumpy-lender-handlers has suggested that they're trying for the end of this week to get loans transfered over to AmSher. Was he right and will they make it? Who knows, but it would be a bit embarrassing to have this hanging over Prosper when Prosper Days rolls around Monday.

Now Georgia's On The Danger List

From Calculated Risk, another good reason why Georgia should be on your danger list (with California, Florida, New Mexico, and Arizona)

For the most part, Atlanta didn't participate in the price boom. This graph compares the Case-Shiller house price index for Atlanta and Miami. Although prices rose much quicker in Miami, and are now falling faster, Atlanta has a higher percentage of loans in default.

One reason might be that Georgia led the nation in Interest Only loans. Another might be that lenders are able to foreclose quicker in Georgia: From the NY Times last July: Increasing Rate of Foreclosures Upsets Atlanta

Cloning Prosper

This guy just doesn't seem to get the hint that Prosper isn't quite a slap-dash operation (web infrastructure wise). He's been posting on various rent-a-coder sites, trying to find someone who'll throw together a clone of the Prosper website. It's been amusing to watch. This latest posting continues the trend...

Need a price to clone www.prosper.com I would like you to actually sign up and look at the features so you can understand project. I am also looking to start immediate so please be prompt on bids. If there will be major increases for graphics or anything else not relating to coding pleaes provide seperate price for each. Also important is the ability to communicate in English, it doesn't matter to me where you are from, as long as you can do a quality job, in a timely manner and communicate with me in English. Again list prices seperate in descrition part of yrou bid along with time to start and complete. I have more so i need to keep it moving.

I wonder how much the one bid was for.

Update: Prosper Lending Review had posted on one of the previous attempts to find a sucker programmer to build it.

The Great Collector Conversion Is At Hand

As observed in the prospers.org forums and blogged about by ZCommodore, Prosper has begun migrating collections accounts away from Penncro over to their newest collections agency, AmSher. Prosper had previously announced that this transition would be occurring in an e-mail to some lenders (not all received it) allowing them to opt-out of the transition:

We have received a number of complaints about the effectiveness of PennCro as a collection agency for Prosper loans. Over the past few months we have worked intensively with PennCro to improve their collections, however, the results were not to our expectations, and more importantly, to the expectations of Prosper lenders.

One common way to improve collections is to do “champion/challenger” testing, where some accounts are sent to one collection agency (the “champion”) and a similar number and quality of accounts are sent to another agency (the “challenger”). To date, Prosper does not have a large enough pool of delinquent accounts to conduct traditional champion/challenger testing on a side-by-side basis. However, a key aspect of champion/challenger is that the agency losing the challenge is penalized by accounts being removed from them.

In this instance, PennCro has not achieved our monthly production targets, and we are therefore recommending that accounts currently designated for PennCro be re-designated to AmSher. The compensation percentage paid to AmSher on these existing accounts will be the same as the percentage paid to PennCro. You may, however, elect to keep your delinquent accounts with PennCro.

If you wish your existing Notes to remain at PennCro, please send an email to collectionstesting@prosper.com with subject of “Retain PennCro” by Monday, February 4, 2008, otherwise all your existing Notes designated for service by PennCro will be automatically transferred to AmSher and no further action is required. As usual, if there are multiple Lenders on a loan to a borrower, Prosper will use the selected collection agency common to the Lender or Lenders who have the greatest ownership interest in the loan. In the event of a tie among the Lenders as to their choice of a collection agency, the account will be re-designated to AmSher.

During the process, it looks like loans (even very late ones) that were in collections will drop out for a bit. The new collection agency will be assigned, and the game will be afoot once again. I, for one, welcome our new collections overlords.

Junk Mail Seller Revisited

Jeff at My Microfinance had previous claimed that Prosper was selling his address to junk mail groups. Even though there was reason to question the accuracy of his claim, he ranted and raved with the best of them.

Since these claims, Jeff posted that he was lending on Prosper again with this cryptic reply:

Prosper.com has rectified the issue with me in private. Plain and simple… confused yet? I’m not going to bust out the 4th grade attitude and tell you that I know something you don’t know, but something is happening inside the ‘blue stonewall’ that may change some opinions after Prosper Days, even those of it’s harshest critics. Mine just happens to have changed early and perhaps for the better.”

He then proceeded to scrub his entire blog's history, removing all incidents of his ranting and raving (except for that darn Google cache), and proceeded into a happy land. Jeff jumped up and screamed that the sky was falling then claimed he was OK now. If information was sold or otherwise leaked out of Prosper, it's interesting. If Jeff jumped the gun and cried wolf, he should apologize. Instead he scrubbed his entire blog's history, removing all incidents of his ranting and raving (except for that darn Google cache), and proceeded into a happy land. This is very bad form, so Jeff gets a wag of the finger.

Ity-Bity Teenie-Weenie Yellow Polka Dot Linkfest

It's been too long since my last linkfest, so time to have at it...

Prosper Steering Borrowers Away From 25K Loans

With my recent loan on Prosper I tried to keep an eye out for interesting stories along the way. In this case I found something I didn’t like as a lender… Prosper explicitly told me not to put up a 25K listing.

LoanChimp - Battle Of The Titans

Just the other day my average loan age according to LendingStats (LS) and Eric's finally reached the 1 year mark. I thought it would be a great time to compare ROI calculations for each of the sites to eliminate any effects from annualizing calculations. I missed my 1 year mark on Eric's by a couple of days, but close enough...)

j9359 - Gaming the Portfolio Plans

I wonder if borrowers have figured out how to game the portfolio plan standing orders? There seems to be some opportunity for borrowers to tailor their loan listing to fit a portfolio plan standing order.

ZCommodore - Prosper's biggest month since May 2007

I don't know what has changed but from Prosper's perspective, I'm sure they're happy to see the increase. On the other hand, I'm somewhat curious if they've relaxed some standards relating to their approval procedures. I participated in 2 loans this past month and both of them were approved very soon after they ended. I'm not really worried because in both cases I've interracted with the borrowers for many months before bidding on their loan so I'm sure they will pay it back. I don't know about any of the other 1048 loans though.

bamalucky - My wife paid off her prosper loan(maybe)

My wife is trying to pay off her prosper loan,but the money is still in the bank.Prosper system said it would be removed by January 30,but it's still in her bank account.

In the "that about sums it up" category, Desperate consumers can no longer get credit -- Can you capitalize?

But if you've been living within your means and have some cash to invest, you may be able to capitalize. The sudden stinginess of credit card issuers is likely to flush a lot of borrowers onto sites like Prosper.com, which arranges loans between individuals.

The only question is whether you want to take a risk lending money to people who've been cut off by the banks.

$7.2M In January Prosper Loans, But How About February

As was foreshadowed, Prosper succeeded in passing $7M by booking $7.18M in loans in January. This is good news for Prosper, but there are shadows on the horizon. Lending Stat's most recent monthly estimate for February is a meager $5.25M. This number has been growing throughout February, so I suspect that Prosper succeeded in pulling a few loans into January that may have otherwise cleared around February 1 (this would dampen February's early loan totals).

Prosper's prospects for the month then depend on keeping that listing volume up and getting loans funded. There may be challenges there as Bamalucky has observed:

Can anyone remember the last time there were only 1763 listings on prosper? Tons of loans are 100% funded & being bid down.

January Prosper Collections Report

This is part of my ongoing series monitoring collections efficiency (December's report for comparison). For a reminder on the methodology, I took a snapshot of all of Prosper's loans on January 1 and compared their current status against those same loans on February 1. Presumably, loans that don't get further behind have some kind of collections activity happen succeed. The statistics are below.

	Total	Got Better	Stayed The Same	Got Worse
Payoff in progress	30	30 100.0%	0 0.0%	0 0.0%
Current	12620	182 1.4%	12122 96.0%	316 2.5%
Late	265	82 30.9%	33 12.4%	150 56.6%
1 month late	304	51 16.7%	12 3.9%	241 79.2%
2 months late	249	16 6.4%	16 6.4%	217 87.1%
3 months late	271	12 4.4%	10 3.6%	249 91.8%
4+ months late	356	11 3.0%	339 95.2%	6 1.6%

This is a rather notable improvement over December, with good signs of collections on "2 months late" and "3 months late" loans.

Months Late	December Signs Of Collection	January Signs Of Collection
1 Month	23.0%	20.6%
2 Month	2.8%	12.8%
3 Months	3.8%	8.0%

If these numbers are taken at face value, this translates into a 63.5% chance of a "1 month late" loan going to "4+ months late" without any collections yielding cash, improving from December's 72% chance. Not good enough, but better.

The "4+ months late" category is very hard to quantify percentage wise. The default sale in December thinned out the herd, improving the percentages, but making month over month comparison very difficult. It is noteworthy that 11 "4+ months late" loans showed signs of improvement, which appears to be a record.

Also of note, 1 4+ month late loan was repurchased in January.

Update: Chris' pickiness is technically correct (see comments) (grumble grumble), so I fixed it. Strikethroughs for deletions, italics for additions.

Chimp's Take On Portfolios and Guidance

LoanChimp has taken to writing about Prosper's statistics behind the portfolios and lender bidding guidance. They're good reads and worth understanding if you're interested in more than push-button lending. This is not to say that Prosper's advances here are bad - far from it. Generating statistics from actual loan data is a huge improvement over the Experian data. The problem is that this data is limited. Prosper has only been loaning for 2 years and is heavily weighted toward loans in the first year. Since Prosper issues 3 year loans, some heavy extrapolation is required to fill in the gaps. It is important to consider the limitations on the statistics you're working with.

First, LC looked at how the bidding guidance has changed over time:

Based on some very rough analysis *, the performance of the original credit segments simply fell apart since their creation. For example, the best performing segment, #1 (AA No Automatic Funding, 0-1 inquiries) went from a projected loss ** of -0.44% to -1.42%. Ouch!

I applaud Prosper for creating the bidding guidance and give them much credit for revising the guidance recently. This kind of stuff is really great for us lenders. But as we’ll see shortly, the latest guidance is falling apart too (although not as badly).

And second, he's turning his attention to the portfolio plans:

At the moment, there is no way for a Prosper lender to track the performance of the Portfolio Plans (PP) unless the lender is actually using them. One could use the performance page with criteria from the PP credit segments, but there is no way to filter out by interest rate - the results would include loans where the PP's were bid off.

Fortunately for us, a relatively new lender stated on the Prosper forum * that he created his/her entire lending portfolio with PP's, a combination of all four. I present to you: JohnSmith2k