Prosper Days 2008
February 25-26, 2008
Parc 55 Hotel, San Francisco

Here is the registration page: Prosper Days 2008 Registration

Also new this year…  If you are a member of the press or a blogger you may attend for free: Press Registration

And for nostalgia here is the video of RateLadder at Prosper Days 2007

• RateLadder Presentation At Prosper Days Today I am presenting at Prosper Days 3rd Party Showcase.  Eric from Eric's Credit Community leads off, then RateLadder, then 2 guys from UC Berkley. Here is a sneak peak RateLadder Prosper Days 2007 Powerpoint (unless you are reading this in the future) of my presentation: Here is the video: Here is......
• State Rate Caps Force Borrower (Blogger) To Take Action A C credit (super clean) borrower from Virgina (rate capped at 11%) has been trying to get a loan unsuccessfully on Prosper.  Here is the description: Purpose of loan: Replace an air conditioning unit that went out during a 100 degree day in the Washington DC area. I have made......
• Prosper Days 2008 and Freakonomics Prosper Days is the annual Prosper users conference. Last year was a blast (RateLadder Presentation). This year it is being held in San Francisco at the Parc 55 Hotel. Even though it is a users conference, it is open to both the community and interested parties. Here is the official......
• My Prosper Internal Rate of Return Update (End of Jun 07) = 5.75% This is a RateLadder only IRR update. (An IRR lender “game” update is in the works.) Here is my permanent tracking page: http://rateladder.com/my-prosper-irr/ My Prosper IRR is defined as: Monthly cash flows with one extra month using the current account value minus any loans 1 month or more late. Current......
• Another Default Debt Sale Prosper completed another debt sale...  The details are not yet on the Default Sale History page; however, Prosper Shira did make an announcement on the forums... We completed a debt sale this week which will be evident in participating lender accounts over the next few business days. When a loan......

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L5 is the 6th largest lender (pick your favorite stats site to verify) and he was on the large lender panel at Prosper Days. I asked him for insights in the aftermath of the latest debt sale that his portfolio might have uncovered. As a smaller lender I don’t necessarily have enough vision to be able to draw the most complete conclusions. He has been forthcoming and generous. Enjoy.

My conclusions:

1. Prosper’s current borrower agreement and collection methods lack teeth in subprime. I knew HR’s would be garbage, but E’s have disappointed, too. I suspect some of this is just macro: subprime is overextended and melting down across the board. Thus, E’s and HR’s are best avoided except in rare circumstances.

2. The higher credit grades are now performing better than mid-credit / near-prime (we already have ruled out subprime).

3. For new investments, AA and A seem best poised for solid (if uninspiring returns); B, C, D would be opportunistically and selectively attractive.

4. Homeowners seem to net $.15/dollar while non-homeowners net $.05/dollar or less. Debt sale amounts have been disappointing to say the least. I think a lot of this has to do with how the Prosper borrower contracts are written and structured — I’ve told Prosper they should have stronger default clauses. For instance, > 3 months late and the whole loan should be callable. This would increase aftermarket bad debt sales amounts, I believe. Ditto there should be more / escalating deadbeat fees.

5. I have been impressed that Prosper has stood behind any loans with bad data and bought them back, I’ve had a few of these. So kudos to Prosper for living up to its identity theft guarantee. This frankly reinforces the higher grade credits where this was one of my bigger concerns — seems Prosper will buy them back in ID theft cases ( i.e., they take full responsibility for ID vetting).

Net for me: I’m going to give it more time to see how my portfolio matures. I expect I will get a high single digit positive return from my portfolio when all is said and done. This is OK (I think I will make money), but probably for me at least not enough of a return to warrant the work that’s involved.

If Prosper changes some of its borrow agreement terms to give them more teeth, I think that would change the game and potentially lure me back in. They just aren’t set up to be bad ass enough to deal with subprime deadbeats at present.

(To be clear, I’ve had some really GOOD subprime borrowers, it’s just that the deadbeat loans are defaulting with a higher % and lower collection figure than I had projected, which washes out a lot of the D and all the E returns I had been modeling.)

Well, live and learn — the community is evolving and I think getting better, net. I just need it to improve a bit more before I’d jump back in.

- L5

• Prosper Default Debt Sale As loans become seriously delinquent on Prosper (4+ months late) they are sold to debt buyers.  These debt buyers pay pennies on the dollar and then attempt to collect on the debt. I have often wondered exactly what pennies on the dollar meant.  I gathered anecdotal evidence from some of......
• Prosper Webinars I am wondering if anybody has gone to one for the Prosper Webinars on lending, borrowing money, and group leading. I have been receiving email invitations for several weeks, but I don't see how they would help me.  If you have gone to one of them can you tell me......
• Rateladder Referral Listing: Debt Consolidation Update: This listing has been withdrawn and relisted as an autofund  at 24.25% and is still missing a picture...  I think the 1st listing was better, but this one is still worth a bid. Active Listing: Debt Consolidation Original Listing: Debt Consolidation I have bid (only bid if you want......
• RateLadder at Prosper Days Day2 I have been playing with the new ROI tool this morning.  In some ways it is quite cool, but I don't have a good feel for what it is trying to tell me except stay away from the old HR.  No problem there the RateLadder Portfolio is AA-D with a......
• Portfolio Plans -- The Good, The Bad, and The Ugly I think Prosper is doing some interesting things lately and Portfolio Plans are no exception... A portfolio plan is a series of slices of data that when combined make getting into a diversified investment of Prosper loans extremely simple.  There are 4 risk levels for the current plans. Conservative (estimated......

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Here is the video from the 3rd Party Showcase. I was lead off, then Eric from Eric’s Credit Community, then a couple of Berkley Grad Students.

• Prosper.com and Your Emergency Fund I was reading an article on bankrate.com about Using a CD Ladder as Parking Locations for Your Emergency Fund. One of the big problems with a CD Ladder is the finite number of times you can withdraw money without a fee. Another big problem is length of time it......
• Prosper.com Lender Game — LazyMan Initial Update — (0.93%) to 20.75% LazyMan of popular personal finance blog Lazy Man and Money (one of my favorites) and Lazy Man and Health has joined the "game".  He has been a Prosperite (aka TechnologyGuy) for over a year.  Which also makes him the first oldtimer to join the game.  You can see from his cashflow that......
• Prosper.com Lender Game -- RateLadder_com Initial Update -- 12.61% to 12.61% I am RateLadder.  I run this website.  I am compelling because you are reading this.  This blog documents my journey and is a more extensive writeup of what I am doing and why than any I could provide in a single paragraph.  I encourage you to look around.  I encourage......
• Prosper IRR Lender “Game” Jun 07 Update It is time for the June 2007 update of the IRR Lender “Game.” Since the last update there has been a delinquent debt sale.  This is a major event for our IRR game and it remove assumptions about defaulted debt by solidifying losses and increasing the cash position.  This will cause the......
• Prosper com Loan Ordering Feature Request My account has 56 loans originating across 7 months.  I regularly go and look at the entire list and attempt to gleam which loans need to make a payment.  This task is an exercise in futility.  The loans are in origination date order so at any given time there are 7......

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If you missed Prosper Days here are the session videos…  Alas, the 3rd Party Tools is not one of the videos… What’s up with that?

http://www.prosper.com/prm/prosper_days/video.htm

And here is the photo gallery…

http://picasaweb.google.com/prosperdotcom/ProsperDays2007

One quick highlight from the photo gallery.  Here I am asking Chris Larsen CEO of Prosper, if I heard him correctly and asking for clarification on linking loans to listings…  He deftly sidestepped the question. 

• Prosper com Loan Ordering Feature Request My account has 56 loans originating across 7 months.  I regularly go and look at the entire list and attempt to gleam which loans need to make a payment.  This task is an exercise in futility.  The loans are in origination date order so at any given time there are 7......
• Prosper Week at LazyManAndMoney Lazy Man at LazyManAndMoney is having a week of Prosper posts: Prosper Week...  He is an early adopter of Prosper (Feb 06) and always has excellent insights...  Don't miss it. Here is the lineup: Tuesday - In Defense of Prosper.com - Can Prosper Survive? Wednesday - In Defense of Prosper.com......
• Why Prosper.com is a great 3 year Rate Ladder. OK so first of all...  Everyone has heard of a a CD Ladder, right?  This is where you buy your CDs so that expire at intervals.  This ensures an average interest rate and continually available funds.  Typical CD Ladders are 1,2, or 5 years long.  Don't ask me why but......
• Fed Up with Prosper Non Auto Funding Loans and Lack of Time Left Criteria I have watched my money sit for 8 days only to be outbid in the waning minutes for the last time.  I am swearing off of non auto funding loans until such time as Prosper adds a time remaining criteria to the standing order filters. From now on I will......
• Prosper.com Lender Game — Pensioner Initial Update -- 7.08% to 25.23% Pensioner is what he wants to be, it is not what he is.  He has the largest dollar amount portfolio in Prosper with a current account value of well over 800K.  He is an auditor and accountant by trade.  He is local to the San Francisco Bay Area.  In addition, he participated......

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Previously I had some additional questions for the Large Lenders on the Prosper Days Panel.

Both L5 and now pensioner have responded.  I would like to thank them for their insights and generosity of time.  As I said about L5, pensioner is a sharp tack and I knew he was thinking correctly, I just wanted to be sure.

Here is the response:

I probably did give the erroneous impression during my Prosper Days presentation that I thought that rate minus defaults is equal to ROI. I am well aware that that is not true. On the other hand, when I am scanning listings I do use that as a quick and simple approximation. This was particularly true when I was trying to get my first $750K loaned out. I was making large bids on AF listings so I did not spend much time with precise calculations. At times I bid several thousand dollars after reviewing a listing for a little as 10 seconds, if I thought that the listing was going to be snapped up.

I am planning on studying the ROI white paper, but have not yet found time to do that. You also mentioned IRR calculations, which is another thing I plan to explore, but have not yet found the time for.

I enjoyed your presentation. My favorite part was the contrasting opinions from your friend and your wife on the same listing.

If this or any other of my communications to you have value, you are welcome to share them.

pensioner

• Update: RateLadder Prosper Listing Request Reaches 100% Funded Sometime late afternoon on Wednesday (1/30/08) my loan reached 100% funding.  This is a critical first step in getting a Prosper loan. Without reaching 100% funded you cannot get a Prosper loan.  Reaching 100% funded should be the 1st goal of an Prosper borrower and the tools for reaching 100% should......
• New Prosper Changes Digested My apologies for the verbatim post last night... But it was late... Here are the changes that affect me as a lender and 3rd party developer... On the Lender screen in the active loan summary there has been added a break down of payments received as well as a summary......
• RateLadder Requests Prosper Loan I am requesting a Prosper Loan.  I am a AA, homeowner, verified bank account, Prosper lender with an 11K+ lending portfolio. This is my 1st foray into borrowing on a p2p website. I believe in p2p lending and with this loan I will gain a borrower's perspective. My loan matches the......
• pninen in Prosper forums -- Magnificent Writeup on the Lender Costs of Not Paying Interest Here is the post in it's entirety because it is that good: In the early days of Prosper, I estimated that the cost of my idle cash (cash balance waiting to be bid, cash tied up in bids, cash tied up in loan verification, cash tied up waiting for payments......
• RateLadder Lauches Prosper Group Focussed on Borrower Success As a dedicated and fanatical lender I have been trying to climb up the RateLadder. Put my experience to work for you, allowing you to climb down the RateLadder and obtain the best possible loan rate for your listing. Membership and Listing Requirements How dedicated? How fanatical?   I have been......

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Previously I had some additional questions for the Large Lenders on the Prosper Days Panel.

L5 Returned my email… Here is his response. If you can’t tell L5 is a sharp tack and I knew he was thinking correctly, I just wanted to be sure  

Thanks for your nice comments, RateLadder!  Really good to hear your thoughts.You are absolutely right that interest rate – default (or delinquent) rate doesn’t equal yield ROI.What I was doing (a year’s worth of data then using 1 – current loan %) was a CRUDE approximation.  My point was that even a crude approximation using real data from Prosper is, I feel, more relevant than using the Experian data, especially since I feel zeroing in on extended credit stats is very relevant.Now that Prosper has released their ROI estimate tool based on their portfolio data, this is clearly the benchmark to use.  As they just released this on Monday, I’ve only played with it briefly, so don’t have full comments for you on it.  But it has the advantage of being able to filter based on all the different attributes of Prosper loans, while also giving much better ROI calculations.  Basically there are THREE “deducts” from the average rate column — the three negative numbers — that, as I understand it, you want to sum and deduct from the interest rate proposed by a borrower to get the expected yield.I attended a session where they talked about their methodology for determining the ROI, but I didn’t take detailed notes as they said there was a white paper on the site (or maybe in the forums) that goes into this in details.  So I plan to get the white paper and think others who are interested in this should get it and read it, too.  (Maybe you can post a link to this on your blog.)The key thing they use in ROI is a technique called “roll rates” which estimate on a go-forward basis (based on past data) what percentage of loans in one category will “roll” to the next (worst) category in the next month. For example, their data right now suggests that 3% of C loans will roll to 1-30 days late each month; of those, 25% will roll to 31-60 days late — i.e., 75% “cure” and 25% remain delinquent. Of those that are 61-90 days late, 80% roll (i.e., don’t pay anything), while 20% don’t roll and remain delinquent.  Obviously the roll rates vary based on the characteristics of the loan class being studied — credit grade, extended credit scores, etc. — and you can filter on that.  They also factor in early payoffs, which is nice, but I think not hugely relevant to me.They did say that their calculations were different than IRR… I didn’t understand the exact differences, but I think the white paper goes into.So, anyway, find the white paper and you (and I) will have answers.  Good questions.Feel free to post this to your blog if it’s useful.

Wishing you the very best,

- L5

L5 appreciates Haiku…  So this is for him:

R O I

Rate Minus Default?

No Markov

I will be tracking down this white paper.  Prosper Andrew (Top notch.  Be nice to him and doors are unlocked.  He would do quite well with a donation button. :)  responded to a forums request by posting a link in the forums. Here it is: http://www.prosper.com/public/help/topics/lender-marketplace_performance_calculation.aspx
 

Update pensioner responds: http://www.rateladder.com/2007/02/14/pensioner-responds-avg-rate-minus-default-rate-does-not-equal-expected-return/

• RateLadder at Prosper Days Day2 I have been playing with the new ROI tool this morning.  In some ways it is quite cool, but I don't have a good feel for what it is trying to tell me except stay away from the old HR.  No problem there the RateLadder Portfolio is AA-D with a......
• Portfolio Plans -- The Good, The Bad, and The Ugly I think Prosper is doing some interesting things lately and Portfolio Plans are no exception... A portfolio plan is a series of slices of data that when combined make getting into a diversified investment of Prosper loans extremely simple.  There are 4 risk levels for the current plans. Conservative (estimated......
• RateLadder Lauches Prosper Group Focussed on Borrower Success As a dedicated and fanatical lender I have been trying to climb up the RateLadder. Put my experience to work for you, allowing you to climb down the RateLadder and obtain the best possible loan rate for your listing. Membership and Listing Requirements How dedicated? How fanatical?   I have been......
• Pensioner Responds -- Avg Rate Minus Default Rate Does Not Equal Expected Return Previously I had some additional questions for the Large Lenders on the Prosper Days Panel. Both L5 and now pensioner have responded.  I would like to thank them for their insights and generosity of time.  As I said about L5, pensioner is a sharp tack and I knew he was......
• LendingStats Site Update LendingStats has just announced an update...  And I think it has 2 cool features and a very nice upgrade to the LendingStats ROI calculation. The ROI upgrade:  Updated the collection rates used to calculate estimated ROI corresponding to how Prosper split out the Penncro Collection rates by credit grade. This caused......

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In the large lender panel pensioner state that he focuses exclusively on 20%+ loans and C, D, and E credit grades.  While I don’t have the risk tolerance for those default rates  I thought I should impose a rate floor.  I have chosen 15%.  I have adjusted all my standing orders to no longer bid on any loan less than 15%.  If a standing order had a lower rate for a particular grade I raised the rate to 15%.  All other rates remain the weighted average over the last 100 days plus 1.5%.

In addition, I have chosen to add an additional extended credit requirement.  I will now only bid on listings that have a debt utilization of 5%-70%.  I am not able to test this new assumption using the Prosper ROI performance tool as that information does not exist in old data.

• Prosper's People-to-People Lending Market Survey SAN FRANCISCO--(BUSINESS WIRE)--Prosper (www.prosper.com), America's largest people-to-people lending marketplace, today introduced its first monthly People-to-People Lending Market Survey. Prosper's People-to-People Lending Market Survey will survey the marketplace each month to provide key statistics including: membership and loan volume statistics; marketplace returns; borrower rates; mix of prime, near prime and sub-prime......
• New Loan Funded — home renovations — $25,000 at 19.5% — B Credit — DTI 46% A new loan funded (home renovations — $25,000 at 19.5%).  I participated via a a manual bid the loan was NonAutofunding.  The borrower had B credit and 46% DTI.  As a reminder my standing orders (and manual bids) only find loans with 0 current delinquencies, 10 or less delinquencies in the last......
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• Measuring Social Capital So my loan on Prosper closed at a final rate of 9%.  What was my social capital worth?  Did being a known quantity in the Prosper community help? To start with I decided to try and measure the average loan rate and standard deviation... I used the ProProsper Loan Rate......

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The 2nd session was the Big Lender Panel.  It was great.  Worth the price of admission.  The Lenders (with links to their portfolio) were pensioner, L5, and janeybooboo.  They are all manual bidders and from the sound of it they spend quite a bit of time vetting the borrowers.  The biggest thing I took away from it is that they have no problem filling their capacity.  The question I would like to ask them that I didn’t is this….

Subtracting the default rate from the interest rate does not give the ROI.  (I think they were implying it was an approximation for ROI.)  In order to calculate ROI you need to use a Markov model and assume some default characteristics such as default rates over the life of the loan.  (Similar to the new performance tool, but I think they are making some assumptions.)  Given that I use standing orders what I would rather do is Monte Carlo a Standing Order against the data and see the actual IRR.  Are they in fact using a Markov model or similar?  And I would love to know what their Prosper IRR is using my definition.

Update L5 responds: http://www.rateladder.com/2007/02/14/avg-rate-minus-default-rate-does-not-equal-expected-return/

Update pensioner responds: http://www.rateladder.com/2007/02/14/pensioner-responds-avg-rate-minus-default-rate-does-not-equal-expected-return/
The morning session (Lender Portfolio Analysis) was kinda blah and I will spare the details… I found it to be a rehash of the forums advice.  The new ROI tool was one topic.  I learned a little about it’s internals, but I look forward to reading the “white paper”.  Here is a link: http://www.prosper.com/public/help/topics/lender-marketplace_performance_calculation.aspx
 

• Pensioner Responds -- Avg Rate Minus Default Rate Does Not Equal Expected Return Previously I had some additional questions for the Large Lenders on the Prosper Days Panel. Both L5 and now pensioner have responded.  I would like to thank them for their insights and generosity of time.  As I said about L5, pensioner is a sharp tack and I knew he was......
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• Prosper IRR Lender "Game" Prosper IRR is a tricky calculation.  The concept is very simple.  The problem lies in how to treat delinquent and late loans prior to the debt sale.   Before loans are late and after the debt sale treating one's account balance is whole.  While a loan is late the loan's value......
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I have been playing with the new ROI tool this morning.  In some ways it is quite cool, but I don’t have a good feel for what it is trying to tell me except stay away from the old HR.  No problem there the RateLadder Portfolio is AA-D with a B+ average weighting.  At first glance, it seems they made some trade offs between ease of use and transparency.  Here is the documentation for the ROI calcualtor: http://www.prosper.com/public/help/topics/lender-marketplace_performance.aspx 

I think I will be attending the 9am Portfolio Analysis for Lenders and the 10:30am Lender Panel.  I am the 6′10″ guy with a beard, please say hello.

Portfolio Analysis for Lenders:

This presentation begins with an expert demonstration of the marketplace performance tools, lender statements and accounting details by the engineers who built them.  Then Kirk (CFO) will demonstrate how to use these tools to derive optimum lending portfolio ROI.  Attendees will have opportunity to ask questions of the pros.

Lender Panel:

Learn from Prosper old timers in this session featuring several of Prosper’s biggest lenders who will share their personal strategies for lending including:

• What they look for in a listing
• What types of listings they steer clear of
• What pitfalls they avoid in lending decisions
• Their ’secret sauce’ based on their personal experiences

• The WealthBoy Strict ROI for Prosper Lenders WealthBoy, whom I met at Prosper Days, has just released The WealthBoy Strict ROI for Prosper Lenders -- an open source, sql based ROI calculation for Prosper Lenders.  His calculation makes use of the public and private data files from Prosper.  He was inspired by his Prosper Blog post: The Rule......
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• Prosper Ordered to Cease and Desist by SEC http://www.sec.gov/litigation/admin/2008/33-8984.pdf It appears to me that the ruling is that they have been selling unregistered securities without a license.  What does that mean for the lenders?   Doesn't the board and company officers have some personal liability too? There is some discussion at prospers.org: http://www.prospers.org/forum/prosper_order_to_cease_and_desist_by_sec-t10903.0.html No one seems sure just yet... SEC: UNITED......
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• Prosper Days Day 2 Update The 2nd session was the Big Lender Panel.  It was great.  Worth the price of admission.  The Lenders (with links to their portfolio) were pensioner, L5, and janeybooboo.  They are all manual bidders and from the sound of it they spend quite a bit of time vetting the borrowers.  The biggest thing I......

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RateLadder Presentation at 3rd Party Tools Showcase was very well received.  I would have liked a little more time for questions and answers, but the fact that people wanted to ask questions was great…  I got some laughs and genuinely had a great time.  There was probably 60 people at the presentation.  If you were at the presentation please leave comments.

Let me back up.  Eric Petroelje from Eric’s Credit Community was leading off… unfortunately the wireless connection went haywire right before he started.  He handled it very well and started in on his site without visual aids.  I was asked to start while they fixed the connection.

This illustrates that you should never give a live demo unless you can control all the variables.  Same idea, but I always heard that you should never ask a question you don’t know the answer too.

A couple of undergrad students at Berkley (David McIntosh and ???) presented the data analysis they had done in preparation for evaluating keywords in loans and the results.  Their talk focused on loan funding.  I would be more interested in default rates.  Regardless, they aren’t publishing the results yet for fear borrowers might game the system.

One interesting question I was asked: 

Have I ever considered investing for someone else? 

The prospect intrigues me, but I don’t see how the economies of scale would work…  If I were charge 20% of the profit and I could earn 16% then I would need to be investing just over 3 million (10% of all loans at this time) before I would break 100K in compensation.  So I guess I don’t see how someone could afford to pay for my time. 

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• Capacity is Not a Problem with Prosper.com -- Invest 10K in 1.5 Months on Nothing but Great Loans. I have often wondered if the large lenders have any capacity problems. That is, do they ever find it hard to find loans.  I asked pensioner that very question at Prosper Days and his response was, "I moved $750,000 into Prosper in a month and a half, so I would......
• Prosper in Quiet Period? I though Prosper had already done this: http://www.rateladder.com/2007/10/30/prosper-files-s1-with-sec/ From Prosper This morning:  http://blog.prosper.com/2008/10/15/prosper-filing-registration-statement-enters-quiet-period/ Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.The registration filing is a necessary step toward making the......
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