How can Prosper improve for investors

[Peter]

I am working on a blog post about changes I would like to see at Lending Club and Prosper. We have a thread going here about Lending Club but I wanted to open it up for a discussion on Prosper.

Let me know what you think are the main points you would like Prosper to address.

[WES]

Prosper needs to update Debt Sales data. They don't show any historical data past 2007:
Dec 2007
701 loans sold   
12.5%: Homeowners
9.6%: Non-homeowners with AA and A credit grades
9.1%: Non-homeowners with B, C, and D credit grades
7.3%: Non-homeowners with E and HR credit grades
4.8%: Non-homeowners with NC credit grades
3.5%: Texas residents
Aug 2007
309 loans sold   
23.0%: Weighted average price for AA and A credit grades
13.3%: Weighted average price for B, C, and D credit grades
8.1%: Weighted average price for E and HR credit grades
May 2007
294 loans sold   
16 - 19%: Homeowners
2.4 - 3.3%: Non-homeowners
Dec 2006
51 loans sold   
27 - 30%: Homeowners with any credit grade
15 - 18%: Non-homeowners with a credit grade of D and above
3.0 - 3.7%: Non-homeowners with a credit grade of E and HR

[Peter]

Thanks Wes. I will add that to the list for my blog post.

[pioneer11]

It might be because they have not had a debt sale since then.

[Xenon481]

Prosper stopped performing debt sales after December 2007 in direct violation of their legal agreements with lenders.

[pioneer11]

Prosper stopped performing debt sales after December 2007 in direct violation of their legal agreements with lenders.

Don't you think that it is quite interesting that the Admin of this board and the author of the book promoted here didn't know that considering his inside contacts with Prosper?

[ira01]

Prosper stopped performing debt sales after December 2007 in direct violation of their legal agreements with lenders.

Yes, that is absolutely correct.  The Lender Registration Agreement then in effect obligated Prosper to hold regular sales of loans that were 4+months late to Junk Debt Buyers.  The LRA gave Prosper no discretion with that, and no legal authority to choose to hold these seriously delinquent loans.  Then around March 2008, Prosper decided that a JDB offer to purchase the portfolio of 4+month late loans would not be honored, because of supposedly "unacceptable conditions" that the JDB attached to its offer.  Prosper refused to tell its lenders (who were the legal owners of the loans in question, and for whose sole benefit Prosper had a legal obligation to act) what those supposedly "unacceptable conditions" were, and simply refused to sell the loans, thereby breaching its legal obligations to its lenders. 

Many lenders believed that the "unacceptable condition" was a provision that would have required Prosper to repurchase any loans from the JDB that turned out to have been procured through identity-fraud.  Prosper (though not its lenders) would have been dead-set against such a pushback provision, because under the terms of Prosper's so-called "100% identity-theft guarantee" (which Prosper also generally ignored), it would have been obligated to then repurchase all those loans from its lenders, at 100% of principal -- which could have been quite costly to it.  So, it appeared, that Prosper put its own self-interest ahead of the interests of (and Prosper's duties to) its lenders.

For some historical perspective, see:
http://www.prospers.org/forum/prosper_debt_sale_crashes_and_burns-t7527.30.html
http://www.prospers.org/forum/shouldnt_we_have_had_an_update_from_doug_fuller_by_now-t7466.0.html

[Peter]

Prosper stopped performing debt sales after December 2007 in direct violation of their legal agreements with lenders.

Yes, that is absolutely correct.  The Lender Registration Agreement then in effect obligated Prosper to hold regular sales of loans that were 4+months late to Junk Debt Buyers.  The LRA gave Prosper no discretion with that, and no legal authority to choose to hold these seriously delinquent loans.  Then around March 2008, Prosper decided that a JDB offer to purchase the portfolio of 4+month late loans would not be honored, because of supposedly "unacceptable conditions" that the JDB attached to its offer.  Prosper refused to tell its lenders (who were the legal owners of the loans in question, and for whose sole benefit Prosper had a legal obligation to act) what those supposedly "unacceptable conditions" were, and simply refused to sell the loans, thereby breaching its legal obligations to its lenders. 

Many lenders believed that the "unacceptable condition" was a provision that would have required Prosper to repurchase any loans from the JDB that turned out to have been procured through identity-fraud.  Prosper (though not its lenders) would have been dead-set against such a pushback provision, because under the terms of Prosper's so-called "100% identity-theft guarantee" (which Prosper also generally ignored), it would have been obligated to then repurchase all those loans from its lenders, at 100% of principal -- which could have been quite costly to it.  So, it appeared, that Prosper put its own self-interest ahead of the interests of (and Prosper's duties to) its lenders.

For some historical perspective, see:
http://www.prospers.org/forum/prosper_debt_sale_crashes_and_burns-t7527.30.html
http://www.prospers.org/forum/shouldnt_we_have_had_an_update_from_doug_fuller_by_now-t7466.0.html

I don't pretend to know everything that happens inside Prosper or Lending Club. To be honest I have not paid much attention to Prosper 1.0 so I was not aware of this issue with Debt Sales.