Prosper.com - 09/2009 late loan stats update

Here's the September 2009 update to to my Prosper.com late loan statistics charts.

These charts show statistics for the performance of all prosper.com loans. Each curve represents the set of loans that were created in one calendar month. The vertical axis is the fraction of those loans that have "gone bad", in other words are 1 month late or worse (up to and including default or "charge off" as it is now called). The horizontal axis is the observation date. All data comes from Prosper.com's performance web page.

Prosper loans created in the worst month so far, October '06, are now more than 43% bad! This number could still go higher! These are 3-year loans, but we don't know the final number of loans that have gone bad until 3 years + 4 months after origination, because loans are "charged off" when they are 4 months late. On March 1, 2010 we'll know the final numbers for loans originated in October 2006.

Click on the chart to see a larger clearer version.

Here's a chart of the same data in which each curve has been slid to the left to a common origin. The horizontal axis is now days since loan origination month.

Explanation of methodology can be found in my prior postings in this blog, and in forum discussions on the old prosper forum, now archived at www.prosperreport.com

Many of the very early posts in this blog are still on point, and provide background on prosper, from a lender's perspective. If you're new to this, please read old posts before sending questions. Thanks.

The basic fact about Prosper.com loans so far is that about 40% of the loans go bad.

Something unexpected happened this month. The Securities and Exchange Commission has begun to disclose (on their web site) some of the correspondence between the SEC and Prosper while Prosper was attempting to get SEC approval to reopen. I've not seen such correspondence released before, but it seems like a great thing.

From some of these documents we learn that the SEC reads Fred93's blog! A few issues that have often been discussed here are mentioned, and in one place Fred93's blog is referenced by name.

Here are some snips from a June 12 2009 letter from SEC to Prosper:

"We note analysis of the prosper loan originations posted by prosper members which shows loans that are not paying according to their terms approaching 40% for your oldest tranches."

"...there have been concerns expressed about the number of reported loans that closed during a particular month changing. ... Please refer to http://fred93blog.blogspot.com ."

Right on! I was surprised but pleased to learn somebody reads this stuff.

To see the correspondence, go to the SEC's list of Prosper.com filings, and scan thru pages and pages of documents looking for the keyword "UPLOAD" in the first column. Only the letters from the SEC to Prosper are available, so this is like listening to only one side of a conversation. (I wish I could see Prosper's answer to the # of loans originated changing over time issue. I asked Prosper about that myself several times, but never got an answer.) Still reading the SEC letters is quite educational. The SEC really got into the details.

PS: The best discussion among P2P and Prosper.com lenders are found on prospers.org. See you there!