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