Comments on: Top 10 Things New Lenders Should Know

By: mortgage brokers

mortgage brokers — Tue, 23 Dec 2008 14:57:58 +0000

mortgage brokers…

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By: FlatGreg

FlatGreg — Thu, 04 Oct 2007 05:07:43 +0000

E’s aren’t great either. I’m hoping the default rates will go down, as prosper has improved the information it provides to lenders over time.

By: LendingStats

LendingStats — Fri, 07 Sep 2007 16:35:07 +0000

Prosper has only been open to the public since early 2006. If you look at the default rate of HR loans (amount wise) for last year they are a whopping 27% with an additional 15% that are late. Considering that the average rate was 24% you would have to outperform the market by a significant margin to come out ahead. To come out ahead of treasuries you would have to pick even better.. This is why you should avoid lending to HR borrowers.

By: dancing dragon

dancing dragon — Fri, 07 Sep 2007 09:23:53 +0000

Whoops, I read the year wrong in the first post… the loan subset is between 9 months and 2 years old (instead of 1 year). Anyway, if the HR default rate is really 13%, I’m trying to figure out why they lose money if loaned out at 25%.

I should stop posting comments now.

By: dancing dragon

dancing dragon — Fri, 07 Sep 2007 09:12:51 +0000

Okay, I figured it out. It’s the typing of a “less than sign” that is making everything after that in the comment disappear, probably because it’s being parsed as an HTML/XML tag. Can comment previewing be added to the blog functionality? Here is the rest of the comment, take 3:

… with DTI less than 20%.) Using Experian default rates to calculate expected return, lenders on Prosper will lose money. Using Prosper data, for HR default rate around 30%, one would need to loan at around 40% interest rate just to break even. No wonder HR loans lose money. Interesting?

http://www.lendingstats.com/loanPerformance?lenderId=&lenderId=&keyword=&loanAgeFilter=4&dtiLow=0&dtiHigh=-1&loanAmountLow=0&loanAmountHigh=25000&locationFilter=&_los=1&_los=2&_los=3&_los=12&_los=13&_los=14&_los=4&_los=5&_los=6&_los=7&_los=8&_los=9&_los=10&_los=11&_ls=1&_ls=2&_ls=3&_ls=4&_ls=5&_ls=6&_ls=8&_rs=7&accountVerified=&homeOwner=&automaticFunding=&submit=Generate

By: dancing dragon

dancing dragon — Fri, 07 Sep 2007 09:09:28 +0000

Above comment appears to be cut off at certain length. Continued below:

… with DTI

By: dancing dragon

dancing dragon — Fri, 07 Sep 2007 09:04:18 +0000

The chart for HR delinquency rates is very interesting. It would be useful to know what are the actual default rates per year for Prosper loans by credit grade and/or other characteristics. For instance, what percent of loans defaulted between age 0 to 1 year, between age 1 to 2 years, and between age 2 years and 3 years, or any age range of choosing. It would be interesting to see how default rates vary over the life of loans. For instance, is the probability of defaulting constant over the life of a loan, or does it vary over time?

I look at the below chart for HR loans > 9 months old, and see a default rate of 27%. The customized chart doesn’t allow specifying a start and end age range, but since the first loans on Prosper only started in 11/2005, it can be assumed that this subset of loans is between 9-12 months old, ie. around 1 year old. Which seems to suggest that the yearly default rate for HR loans is actually closer to 30% than the published Experian default rate of 13.x%. (Although this may be partially explained by the fact that Experian rates are based on a subset of borrowers with DTI