Thursday, April 10, 2008

Prosper's March Marketplace Summary

Two days ago, Prosper released their March Marketplace Summary (also on Business Wire). As always, the most interesting part is Chris Larsen's marketplace commentary:

As we have previously reported, Prosper’s mix of “well priced” loans – loans with an attractive risk-return tradeoff – has dramatically changed from the same period last year with approximately a 200% increase in the percentage of “well priced” loans and a six-fold decrease in “low priced” loans – loans with an unattractive risk-return tradeoff. Part of this positive trend is attributable to the introduction of portfolio plans and performance guidance from the Prosper Marketplace – changes introduced last October. These changes continue to drive better overall performance of the market.

In March we saw further evidence of this with portfolio plan performance improving. For example, the Conservative portfolio plan – one of four model portfolio plans Prosper has provided as templates that can be used by lenders – consists of five credit slices. Looking at all the credit slices across all four plans, 18 of 21 slices improved or remained constant. This is quite positive considering the continuing credit crunch occurring in so many traditional financial markets and should lead to both better rates for borrowers and better performance for lenders.

We are also seeing a healthy start of custom portfolio plans, which lenders can create from scratch or modify from an existing Prosper model plan. These plans can be easily shared with friends or family. In March, approximately 1,800 custom plans were created that spawned over 18,000 bids.

Let me sum up Inigo Montoya style:
  • People are funding loans at interest rates where they will have a reasonable chance of making money and are backing off funding loans where they don't have a reasonable chance of making money.
  • The statistics are getting stable for the portfolio plans. Before, the default rates were worse than we predicted. Now, not so much.
  • People are using the custom portfolio plans, to the tune of around $1M in bids.
In other words, Prosper-derived statistics are a GOOD THING (TM), as is lender bidding guidance. Beyond this, there are lots of statistics which, if you're interested, you can attack.

No comments: