Prosper said a few months back that they were going to tackle collections and try to improve collection rates (Prosper Tackles Collections). It now appears that Prosper has been keeping their end of the bargain. Penncro collection rates have now improved across all credit grades from around 12% in August to 14% in November.

I think this is great for lenders, real props to Prosper for listening to lenders on this issue.

Prosper recently introduced a new feature on their system called Portfolio Plans. It essentially is a set of standing orders to help lenders invest based on their tolerance of risk.

Some thoughts came up after seeing this and hopefully everyone reads the footnotes like me. If you haven’t here they are:

• “Estimated average annualized loss rate based on the historical performance of Prosper loans for borrowers with similar characteristics, originated between Jun-01-2006 and Oct-05-2007, measured as of Oct-29-2007. Actual performance may differ from estimated performance due to many reasons, for example, worsening economic conditions.”
• “Estimated average annualized return is intended to help you understand the risks and return associated with this listing. Lenders should make their own judgments with respect to the risk of default associated with individual loans. Actual performance may differ from estimated performance due to many reasons, for example, worsening economic conditions.”

I think the idea is a step in the right direction, however I don’t think the Prosper marketplace is sufficiently large enough to sustain any sort of mass standing orders such as the ones that will be created by the Portfolio Planner. (At some point your standing order just won’t fill because there are so many similar orders.)

“Ambac Financial Group Inc. and MBIA Inc. shares fell, along with other bond insurers, as Morgan Stanley said the industry may face a “downward spiral” and Goldman Sachs removed its “buy” rating on the two companies.”

“Zerbe said a worsening of defaults on mortgage, home equity loans and credit card balances “could prove to be the proverbial straw that starts the downward spiral in the viability of the guarantors’ business model.” Bloomberg Article

Interesting read since to an extent it effects the Prosper market as well.

The stock market is barely off its highs for the year but it feels like we’re in the start of a bear market. (As of the close today the S&P is roughly 4% off its highs this year). There is going to be more pain it seems as I doubt the Fed can negate the business cycle. With the Fed’s reluctance to keep rates high, commodity prices are hitting new highs while the US Dollar is making new lows. You can now get $1.05 for every Canadian dollar while oil is approaching $100 and gold is now trading at just under $800.

Furthermore bad news is coming out of the finance sector where job cuts are being made at numerous firms (Bear, Merrill, etc.) and hiring is being slowed down for next year.

Invest with caution in times like this. On the positive side with the end of the year approaching and bonuses coming up, it will be in the interests of those managing the money to pop the market up.