Top RateLadder Referrers of 3/08

I would like to thank the top RateLadder Blog Referrers of March 2008. Muchas Gracias.

I would also like to thank the sponsors of my p2p lending sites:

No Comments | March 31, 2008 | Filed Under SEO, Site Statistics | Leave a Comment

Prosper Corrects Mistake With Refunds to Lenders and Group Leaders

Back in January we told you how Travler505 had brought it to Prosper’s attention that Prosper was not operating according to the lender and group leader agreements (Prosper Honors Agreements And Pays Interest)…

Yesterday, they finished the work and released the last of the refunds: Completion of Refunds to Lenders and Group Leaders.

The release of funds yesterday was the first impact on my account… It was not a very large impact, but I did recieve some additional funds from these refunds. How much did I receive?

Well I had 3 loans that were affected by the refunds.

#1: refund $0.01295 plus interest $0.000495

#2: refund $0.05222 plus interest $0.001875

#3: refund $0.02096 plus interest $0.000933

For a grand total of refund plus interest of $0.089433

I would imagine that some of the Group Leaders received far more.

2 Comments | March 28, 2008 | Filed Under Groups, News, Prosper.com | 2 Comments

In Defense of Living Off Dividends

Living Off Dividends (aka WealthBuildingLessons (WAB) on Prosper) wrote a guest post on the Prosper Blog: Why I Love Prosper.com. The blog post has generated some heated comments due to one aspect of the post. WAB claimed “over 13% annualized returns”. When questioned what his calculation actually was he said…

I take the amount I initially deposited across all accounts, subtract that from the current value of my prosper portfolios to get the increase. I multiply that by 100 and divide it by original deposits to get the percentage increase.

The only fault I find with this statement of his calculation is that it does not annualize, even through his post claimed annualized results…

Quickly he was attacked for not estimating losses… Why on earth should he guess at the value of not yet realized losses? When the losses are realized they will be accounted for in his account balance. Simply by continuing to monitor… his Prosper account balance will eventually realize the losses and his return calculation will adjust. He cannot writeoff the losses on his IRS taxes until the point at which his account value has realized the losses.

Here is one of the more coherent comments from Peer Lend… Even this comment is attacking instead of explaining.

Hi - you’re not making 13%.

Your ROI formula is straight out of Fantasyland. Among other things (including lack of accounting for time, in any way) it treats all of your lates as *current*. Can you see how that might muddy up the picture a bit? Sorry to be the bearer of bad news.

The “current value” figure is not reflective of anything other than “what you are owed” - even defaulted loans, until they are sold, show up in current account/portfolio value…

If you’d like to look at a more accurate estimate or two, you can see a full breakdown of your portfolio at the following links:

http://www.lendingstats.com/lenders/WealthBuildingLessons
http://www.ericscc.com/lenders/wealthbuildinglessons

The two estimates of your return (~5% and ~1%) differ due to treatment of lates (you can read into their methodology to see why, if you’re interested - but it essentially boils down to one being more “optimistic” than the other).

The reason they differ from your own estimate of ~13% is because these two calculations factor in time, lates, etc - while yours does not.

The calculation you’re currently using, above, is like trying to handicap horses without taking into account that one (or more) of the horses *actually has a broken leg*.

Here was my response…

In defense of wealthbuildinglessons…

Both EricsCC and LendingStats try to predict (in some fashion) what will happen with lates. The prediction is a guess (based on past Prosper history) and neither formula (the code) is available for public scrutiny. I value their attempts at this prediction, but neither are likely to be 100% accurate (or even near 100%) because of their predictive nature.

The only 100% accurate way to evaluate your return is to look at actual history. And whether you like it or not the only loans that have 100% of their history known are either paid in full, defaulted, or repurchased (except for the new agency test loans which some lenders opted into and other opted out of). The treatment of loans in any noncomplete status is purely a guess.

Personally I track all of the predictive ROIs, my quicken ROI, and 3 different IRR values. My hope is that they will eventually start to converge. My expectation for the convergence has no timeline… particularly while I continue to invest/reinvest funds.

My values for these figures range from (2.11%) to 13.06%. In addition, I have 6 loans in the new agency test. I have very little hope of someone without access to my account transaction history being able to calculate my ROI or IRR. It is a good thing I do it myself.

http://www.rateladder.com/2008/03/03/rateladder-irrroi-308-update-211-to-1306/

WealthBuildingLessons return estimation, while overly simplistic because of the lack of time in the equation, will eventually yield the right answer. Like many things with this brave new world of p2p lending… the final outcome will take time.

and then with this later clarification…

I did not characterize the over looking of estimated loss as overly simplistic.

I pointed out some of the many issues with ALL of the estimated loss calculations… and anything that is predictive is… well predictive. It is the difference between a backward looking factual statistic and a forward looking indicator. One doesn’t even attempt to predict the future and the other is just a guess.

btw don’t even get me started on the enormous bounds in the creidt criteria of the credit grade tranches and the unfortunately small number of loans in each bucket.

All estimated loss calculations have issues. They all also have merit when taken in context.

15 Comments | March 27, 2008 | Filed Under Prosper.com, Statistics, Tools | 15 Comments

My Second Lending Club Late

My second lending club late has infected my account. It was a small loan to a super clean borrower… These loan are not the one that typically go late. I have high hopes that it will cure…

Chech out these stats.

FICO Range:	714+
Earliest Credit Line	11/2000
Open Credit Lines	6
Total Credit Lines	7
Revolving Credit Balance	$4,500.00
Revolving Line Utilization	13.00%
Inquiries in the Last 6 Months	0

Accounts Now Delinquent	0
Delinquent Amount	$0.00
Delinquencies (Last 2 yrs)	0
Months Since Last Delinquency	0
Public Records On File	0
Months Since Last Record	0

Clean as a whitsle…

Much has been made of the Prosper collections (or lack thereof until the hiring of Doug Fuller). I wonder… will Lending Club’s collections be any better? I hope so, but only time will tell. I will be sure to keep my readers informed.

Update… I just logged into my LC account and this loan is back to current…

If you would like to try Lending Club I suggest you sign up with a referral link. You will receive $25 signup bonus ($50 if you deposit $1000 or more), which covers your 1st (or first 2) defaulted borrowers. Here is a referral link to sign up and receive the $25 bonus: Signup via this link and receive a $25 startup bonus.

Cheers.

2 Comments | March 26, 2008 | Filed Under Collections, Lending Club | 2 Comments