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.
The worst month so far is October '06. Of the loans originated by Prosper.com in October'06, 44.2% have now gone bad.
October'06 is not alone. Many other months have produced similarly bad performance.
More detail can be found in my earlier posts.
I've started charting some of the loans originated after Prosper's SEC-sanctioned reopening. There weren't enough loans originated in July'09 to make useful statistics, so I've started with Aug'09. In July'09, Prosper raised the borrower credit score cutoff from 520 to 640, a huge change. With these new restrictions on borrowers, the new loans in aggregate should go bad at a much lower rate (ie lower slopes on the new curves). Too early to know much, but the first couple of points do seem to indicate the new loans doing much better.
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.
There have been several interesting developments at Prosper.com during the last month.
As many of you know, Prosper is a startup, burning thru venture capital, and near the end of its cash. As a result, Prosper needs a substantial new injection of cash within the next 6 months, or else. It was therefore a welcome development when Prosper announced that on November 11 Nigel Morris, a co-founder of Capital One, had made an investment in Prosper. Examination of SEC filings shows us that this investment was only $1 million, a very small amount, and also that this investment was in the form of a bridge loan, at 15% interest, and came with a warrant kicker and a position on the board of directors. This investment is not the substantial investment we've been waiting for. Its just a bridge. Bridge to what we're not quite sure. Does the appearance of Morris signal the beginning of a change of control?
On November 11, 2009, Prosper filed its official quarterly report (10Q) with the SEC. This latest 10Q shows that prosper is burning about $2 million of cash per quarter, and had about $2 million of cash left as of Sept 30th. (Of course the Nigel Morris $1 million was added after Sept 30th.)
In late November, Prosper's chief marketing officer, Catherine Muriel, left the company. Muriel was an embarrassment. Her only visible work was authorship of many of Prosper's official blog entries, on subjects such as thanksgiving leftovers and recommendations to buy Christmas gifts at spencers online, a company that sells pranks such as tear-proof toilet paper, and lets not forget the four part series on online dating. (See the forum thread Crazy Muriel Blogs Again.)
On December 2, 2009, Prosper announced the arrival of Nick Talwar as their new "chief revenue officer". I had never heard the title CRO before. A little research indicates that this title generally includes responsibility for "revenue". I thought that was the CEO's job. Maybe its just a fancy name for the marketing guy. In any case, investors haven't heard from Talwar yet, so we can't yet judge what he's going to accomplish.
On December 2, 2009, Prosper dismissed its accounting firm, Ernst & Young, and hired the much much smaller firm of Odenburg, Ullakko, Muranishi & Co. Although some may find this sinister, I take Prosper's word that this change was made to save money. I don't know anything about OUM, but you can see some of their smiling faces here.
PS: The best discussion among P2P and Prosper.com lenders are found on prospers.org. See you there
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Nearing the end of my relationship with Prosper, I should point out that while I do not disagree with any of your issues with Prosper, there is one small point that should be kept in mind when looking at your statistics.
ReplyDeleteSome loans go late over time. As such they have repaid some of their P&I and the hit to investors' pockets are smaller than the entire invested amount. This serves to (only slightly) ameliorate the poor performance that your charts highlight.
I cringe at that 45% late rate. WTF??!!!
ReplyDelete:[
So sad. I wish I had read up on this before. I did most of my lending in LendingClub.com but I haven't seen anything in their data which shows otherwise as you saw on my blog.
Since Prosper loans are supposed to amortize after 3 years at some point will you stop extending the chart? At some point the data set is composed only of loans that are paid off, defaulted, and a decreasing number in limbo (sending in sporadic payments). Is it really worth stretching out the graph forever?
ReplyDeleteI looked at the new auditor's web site. While I can not be certain, I suspect that the "smiling faces" belong to actors who posed for business-type stock photos. The people are too pretty and the photos are too perfect.
ReplyDeleteIs this relevant? Probably not. Just one of those things that takes away credibility for me.