Friday, February 29, 2008

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.

3 comments:

Tom said...

"I think Prosper is having problems delivering borrowers."

The fact that Prosper just raised their referral fee for new borrowers to $50 seems to confirm your suspicion.

j9359 said...

Maybe Prosper should allow a third loan? Or raise the cap from $25,000?
That would allow for "Prosper consolidation" loans. :)

erickia said...

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