November 2007 Prosper People-to-People Lending Market Survey
Membership and Loan Volume Statistics
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2007 2006
November November Year-to- Year-to- Since
2007 2006 Date Date Inception
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New Members 33,917 19,062 368,741 119,294 506,508
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Funded Loans $6.4 $3.3 $74.9 $23.9 $103.3
million million million million million
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Average Loan Size $7,880 $4,731 $7,044 $4,797 $6,226
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Daily Average Number of
Borrower Listings 2,800 1,948 2,294 974 1,507
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Estimated Annual Return on Prosper Select Index
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November 2007
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Prosper Select Index 9.13%
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Prime Select Index 8.86%
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Near Prime Select Index 9.40%
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Sub Prime Select Index 8.68%
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Average Borrower Rates on Prosper Select Loans
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2007 2006
November October November Year-to- Year-to- Since
2007 2007 2006 Date Date Inception
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Prime Select
Loans 10.22% 9.50% 10.26% 10.00% 10.63% 10.10%
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Near Prime
Select Loans 15.90% 16.79% 17.64% 16.01% 16.40% 16.11%
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Sub Prime
Select Loans 21.63% 19.63% 25.72% 23.17% 25.14% 23.75%
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Mix of Funded Borrowers
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2007 2006
November November Year-to- Year-to- Since
2007 2006 Date Date Inception
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Prime 43% 21% 31% 25% 29%
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Near Prime 52% 51% 57% 50% 55%
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Sub Prime 5% 28% 12% 25% 16%
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Noteworthy
1) The first time the concept of online person-to-person lending was publicly discussed may have been in Rob Hof’s June 4, 2001 Business Week article, “Let’s Get Crazier!” Note the perspective by Prosper Chief Executive Officer and Co-Founder, Chris Larsen; also the co-founder of E-LOAN (http://www.eloan.com). Read the article here: http://www.businessweek.com/magazine/content/01_23/b3735623.htm
2) Larsen’s commentary, “Money and Merit: Web 2.0′s Threat to the Power Elite,” can be reviewed on the Official Prosper Blog at http://www.prosper.blog.com.
Market Commentary by Kirk Inglis, Chief Financial Officer of Prosper
Perhaps the most noteworthy element of Prosper surpassing $100 million in loan originations is the amount of marketplace performance data it provides. This plethora of data, combined with the scale Prosper has achieved, enabled two key changes that impact the marketplace.
At the end of October, Prosper began making historical payment performance of Prosper borrowers more readily visible to lenders when they are placing bids on listings of similar borrowers. Although this information has been available to the marketplace through the Performance page since February 2007, making it more accessible to lenders during the bidding process enables lenders to make decisions that are consistent with their risk and return objectives. This improved transparency, combined with the credit crunch and subprime meltdown in the broader credit markets, clearly impacted the mix of funded borrowers. For example, sub-prime dropped from 7% of originations in October to 5% of originations in November and prime originations increased from 37% to 43% over the same time period.
The second change to the marketplace was the introduction of second loans for existing borrowers. If a borrower has good payment behavior on their first loan, they are now eligible to list for a second loan. Lenders can evaluate the payment behavior and changes to the borrower’s credit profile to find attractive bidding opportunities. In addition to growing the supply of attractive listings, it allows responsible borrowers to positively enhance their credit profiles and improve their access to credit.
The $100 million milestone is a reminder that Prosper’s rich and unique set of historical performance data has the potential to benefit both lenders and borrowers. The free flow of information is the cornerstone of any successful marketplace and Prosper is committed to making its marketplace data transparent and accessible.
Definitions
2007 Year-to-Date: January 1, 2007 through November 30, 2007.
2006 Year-to-Date: January 1, 2006 through November 30, 2006.
Since Inception: November 1, 2005 through November 30, 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 November 30, 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 with loan amounts between $5,000 and $10,000. 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).
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