Prosper has just introduced this first monthly market survey which provides "key statistics including: membership and loan volume statistics; marketplace returns; borrower rates; mix of prime, near prime and sub-prime loans; and noteworthy marketplace statistics and trends" and analysis from Prosper's CEO Chris Larsen. Here is the full text of Larsen's announcement about the current market situation for Prosper:
"The market turmoil stemming from the ongoing credit crunch, subprime mortgage meltdown and housing value slump naturally begs questions about what impact this market environment is having on the Prosper marketplace. In a nutshell, we would categorize the impact as broadly constructive for Prosper lenders and prime and near prime borrowers. As consumers are being hit with the evaporation of introductory credit card rate offers and home equity loan options, Prosper is becoming an even more attractive financing alternative, particularly for more creditworthy borrowers.
At the same time, lenders on Prosper are exhibiting rational behavior by steering their bids toward borrowers in the higher credit categories and being far more cautious about chasing higher rates offered by subprime borrowers. Evidence of this flight to safety is seen in Prosper’s mix of funded borrowers. For example, the subprime category accounted for only 9 percent of loans funded in August 2007, a marked decrease from August 2006 and the 2007 year-to-date average of 25 percent and 14 percent, respectively.
What remains to be seen is whether lenders on Prosper will start placing less weight on homeownership as a factor in their bidding strategies. It is possible that we may begin to see evidence of this trend given that in our most recent defaulted loan sale the debt buyer placed zero value on homeownership across all credit categories – a highly unusual shift away from placing value on what is typically considered Americans’ largest asset."
Here at PLR, we have also noticed the movement of lenders away from subprime or high risk borrowers. In addition, we just wrote an article about how homeowners may actually be a greater risk than non-homeowners given the current market situation. This article was written before the recent Prosper debt sale where homeowners were not given a premium. Here are the statistics that Prosper wants to highlight for their first market survey:August 2007 Prosper People-to-People Lending Market Survey
| Membership and Loan Volume Statistics | ||||||||
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| | August 2007 | | August 2006 | | 2007 Year-to-Date | | Since Inception | |
| New Members | | 30,623 | | 12,825 | | 270,866 | | 408,633 |
| Funded Loans | | $6.6 million | | $3.9 million | | $56.6 million | | $85.0 million |
| Average Loan Size | | $6,733 | | $5,080 | | $6,969 | | $6,037 |
| Daily Average Number of Borrower Listings | | 2,575 | | 1,173 | | 2,202 | | 1,366 |
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| Estimated Annual Return on Prosper Select Index | ||
| | ||
| | August 2007 | |
| Prosper Select Index | | 10.31% |
| Prime Select Index | | 9.41% |
| Near Prime Select Index | | 10.73% |
| Sub Prime Select Index | | 14.95% |
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| Average Borrower Rates on Prosper Select Loans | ||||||||||
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| | August 2007 | | July 2007 | | August 2006 | | 2007 Year-to-Date | | Since Inception | |
| Prime Select Loans | | 10.15% | | 10.29% | | 11.64% | | 10.03% | | 10.14% |
| Near Prime Select Loans | | 16.83% | | 17.08% | | 16.25% | | 15.90% | | 16.06% |
| Sub Prime Select Loans | | 25.88% | | 22.13% | | 28.72% | | 23.30% | | 23.89% |
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| Mix of Funded Borrowers | ||||||||
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| | August 2007 | | August 2006 | | 2007 Year-to-Date | | Since Inception | |
| Prime | | 32% | | 26% | | 30% | | 28% |
| Near Prime | | 59% | | 49% | | 57% | | 54% |
| Sub Prime | | 9% | | 25% | | 14% | | 18% |
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| Noteworthy |
| Top Five Prosper Borrower States in August 2007 |
| 1) California |
| 2) Georgia |
| 3) Illinois |
| 4) Ohio |
| 5) Florida |
(PLR review note: Here's why Pennsylvania, the second most populous state, is not on the top state list.)
It's very important to note how Prosper has defined the terms used above, especially the Prosper select index. Only borrowers with zero current delinquencies, three or fewer credit inquiries, and a debt-to-income ratio of 40 percent or less are counted in the calculations. Here are the full definitions:
2007 Year-to-Date: January 1, 2007 through August 31, 2007.
Since Inception: November 1, 2005 through August 31, 2007. Prosper’s by invitation only “friends and family” launch began on November 1, 2005 and Prosper launched to the general public on February 13, 2006.
Prosper Select Index: The Prosper Select Index return is the estimated average annual return on invested principal, based on actual delinquency performance to date. The Prosper Select Index includes AA - E credit grade loans for borrowers whose credit reports at the time of application indicated zero current delinquencies, three or fewer credit inquiries, and a debt-to-income ratio of 40 percent or less. The annual return period reflects loans originated in the twelve month period ending one month prior to the observation date of August 31, 2007. Prime Select includes AA and A credit grade loans (credit scores of 720+). Near Prime Select includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime Select includes E credit grade loans (credit scores between 560 and 599).
Average Borrower Rates: Average Borrower Rates are the weighted average borrower rates on Prosper Select Index loans. Rates shown are interest rates, not annual percentage rates.
Mix of Funded Borrowers: Prime includes AA and A credit grade loans (credit scores of 720+). Near Prime includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes E and HR credit grade loans (credit scores below 600).
Just a couple of weeks ago Prosper was taken to task in the forums and and Prosper blogs for announcing that returns on Prosper beat the S&P 500. Critics said the data which showed Prosper beating the S&P 500 was carefully picked and misleading. Others argue that lenders have the same ability to carefully pick their loans. I look forward to seeing how lenders respond to this report.All things considered, I think that this monthly data report from Prosper will be valuable. It's good to hear Chris Larsen's analysis and it gives a regular public way for Prosper to report their growth and success.
