Wednesday, March 31, 2010 - backloaded months

For a long time now, Prosper lenders (those members who lend to others thru Prosper), have observed that a great many loans originate in the last 3 or 4 days of each month. Each month is "back loaded".

The most often discussed hypothesis is that Prosper rushes at the end of each month to push thru any loans that can be pushed thru to make the best possibly monthly numbers. If so, this would be bad for lenders, because Prosper has a number of duties to perform before a loan originates, and lenders want those duties carried out with care. Prosper is supposed to check the borrower against various fraud databases, receive the post card from the borrower verifying their address, and selectively verify other information the borrower has provided. These checks are an important part of fraud protection on which lenders depend. If Prosper is skipping or skimping on these checks during the mad rush at the end of every month, then we'll have a bunch of lower quality loans in the system, and more defaults.

So do we have an end-of-month rush?

I've charted the daily loan originations for the last 5 months vs day of month. Although the chart is a bit busy, you can plainly see that each month is indeed back-loaded.

Now there are several problems with the chart above. First, each month has a different number of days, so the end-of-months don't line up. Second, there are weekends and holidays scattered around, and no loans originate on those days.

To fix these problems, I squeezed out the weekends and holidays, and then slid all the months over so they aligned on the last day of the month, then averaged the five months shown above. The result is this much cleaner chart, showing business days only, and with month-ends aligned.

Yep. I'd say Prosper's months are very much back-loaded. It really does look like the boss walks in when there are about 3 days left in the month and starts yelling that everything must get out the door by month end.

This is the end of another month, and I've updated my loan growth chart. This chart shows Prosper's loan origination by month, so we can see how the business is growing. February was larger than the preceeding month, but still below November '09, and of course well below anything in 2007 or 2008. The last few months have been pretty much a "no growth" scenario.

Today Prosper announced that they're negotiating with investors for a new investment round, which of course we all expected. In fact they must get this done quickly, because they are nearly out of cash. (See my last few writeups for calculations.) It will be interesting to see the details (ie how much did they have to give away) when they emerge in a few weeks.

Tomorrow is the SEC's deadline for the filing of Prosper's annual report (form 10K). At that time we'll learn a bit about how Prosper has managed their cash during October, Nov, and December. (Unfortunately, this document won't tell us anything about January, February, March. )

The best discussion among P2P and lenders is found on I hope to see you there!

Tuesday, March 2, 2010 - 02/2010 Late Loan Stats Update

Here's the February 2010 update to to my late loan statistics charts.

These charts show statistics for the performance of all 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's performance web page.

The worst month so far is now February '07. Of the loans originated by in February '07, 45.3% have now gone bad. Yipes!

More detail can be found in my earlier posts.

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

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.

Not much news from this month. Lenders are waiting to see Prosper's year-end SEC filing (form 10K) which should issue any day now. This will give us an update on how much cash Prosper has left. Based on the September 30'th quarterly SEC filing, I estimated that Prospser has enough cash to live until April 1, 2010. Some time in the next few days the 10K will issue, and we'll learn how Prosper's management has been managing its cash. If they've been frugal, perhaps they can last a bit longer, or ...

As we discuss the possibility of Prosper's next round of venture capital, it is meaningful to look at the scale of Prosper's business, and how it is growing. A new investor in Prosper's business wants to see growth of course. Prosper's business is not sustainable unless it is able to grow to something like 10x its present size, so growth is absolutely essential. The last few months have been disappointing. Where is the growth? This is sad to see. This company once had enviable buzz. Now their marketing is a horrible failure.

PS: The best discussion among P2P and lenders is found on See you there!