The methodolgy or the sql for obtaining the data these curves from the private data export have already been explained in detail, but briefly…

• The Y axis is the percentage of all loans orginated of a given age that are currently 1 month late or worse…
• The X axis is the days loan origination. 
• The curves stop when there is less than 250 loans in the “bucket.”
• These curves are for all loans of a given Credit Grade.  One would get different curves (flatter slopes=better); for exmaple, if you were to choose loans with 2 or less inquires and 5 years of credit history you would see flatter slopes.

The range is 7-8% for AA all the way to ~55% for HR.  

(Click Graph for Larger Version)

Prosper Vintage Curves

• 1 Month Late or Worse Curves by Credit Grade

• 1 Month Late or Worse Curves by Credit Grade (July 1 Update)

• 1 Month Late or Worse Curves by Credit Grade (September 1, 07 Update)

• 1 Month Late or Worse Curves by Credit Grade (August 1, 07 Update)

• 1 Month Late or Worse Curves Clearly High for E/HR

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Another month another update…  The picture is rather muddled right now between the accrued interest showing up in my account balance even on loans that are technically “charged off”and lending stats changing their algorithm… All I can do is continue to track and hope fore some clarity…  On a positive note I have had no loans in the 1 month late category for most of the last month…  (There are 2 in that category now, but for most of June they were not there…)

I am often asked what is the biggest thing I would do different if I could go back and do it again?  I would follow advice very similar to Rich Credit Debt Loan in the post Making Extra Money With P2P Lending. I have learned a lot about credit risks and the like, but I would have much rather been more successful in my lending endeavours… My single biggest mistake in my lending was to ignore inquires.

Here is my current tracking chart…

• RateLadder IRR/ROI 6/08 Update — 0.57% to 16.64%

• RateLadder IRR/ROI Update April 2008 — (2.6%) to 14.37%

• RateLadder IRR/ROI 5/08 Update — (1.35%) to 15.3%

• RateLadder IRR/ROI Update Feb 1 2008 — (1.27%) to 15.52%

• RateLadder IRR/ROI Update — (1.07%) to 14.18%

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Brief Explanation: These curves show the entire set of prosper loan broken down by credit grade and lined up along the x axis on their origination date…  As a loan goes late (1 month or worse) it is counted (either by amount or by count) as late against the population…  The curves stop when the loan population falls below 250 (ie there are 249 or less loans that age or older)…

Recently a study from the University of Maryland claimed a peak default date around month 10 of a Prosper loan.  This would translate into the largest delta  in this graph over a month period.  Does this graph confirm or deny that statement?  Is it conclusive?  Please leave a comment.

Here is the vintage curves by count (click graph for larger version)…

Here is the vintage curves by amount (larger loan go late at a higher rate and therefore on a percentage basis you would expect an increase), (click graph for larger version)…

Here is the SQL that I used to pull the underlying data out of the public and private data downloads…

DECLARE @DTD int
SET @DTD=30
SELECT
cast(aday-originationdate as int) as 'PIT',
l.creditgrade,
sum(PrincipalBalance+NetDefaults) as 'Amount',
count(l.[key]) as 'Count',
sum(case WHEN (mld.DPD!=0 and
       (mld.DPD+(aday-observationdate))>@DTD) THEN
            PrincipalBalance+NetDefaults ELSE 0 END) as 'AmountLate',
sum(case WHEN (mld.DPD!=0 and
       (mld.DPD+(aday-observationdate))>@DTD) THEN
           PrincipalBalance+NetDefaults ELSE 0 END)/
           sum(PrincipalBalance+NetDefaults) as AmountLatePercentage,
sum(case WHEN (mld.DPD!=0 and
     (mld.DPD+(aday-observationdate))>@DTD) THEN
        1 ELSE 0 END) as 'CountLate',
sum(case WHEN (mld.DPD!=0 and
       (mld.DPD+(aday-observationdate))>@DTD) THEN
       1.0 ELSE 0.0 END)/count(l.[key]) as 'CountLatePercentage'
FROM
loan l
inner join creditprofile cp on cp.listingkey=l.listingkey
inner join LoanPerformance mld on l.[key]=mld.loankey cross join alldays
where
mld.observationdate = ( select top 1 observationdate
from LoanPerformance sub
where sub.observationdate < aday
and sub.loankey=mld.loankey order by sub.observationdate DESC )
and aday < getDate()
and aday >= '02/01/2006'
and l.creditgrade!='NC'
group by
cast(aday-originationdate as int),
l.creditgrade
having
count(l.[key])>250 and
sum(PrincipalBalance+NetDefaults)>0
order by
'PIT'

• February 2008 Vintage Curve Update

• Prosper Vintage Curve Update 3/1/2008

• Prosper Vintage Curve Update — 1/1/2008

• Prosper Vintage Curves From Private Data

• Daily Late 0 DQ Vintage Curves

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My account update for the month shows some general improvement…

One thing to note is that with the loans in the debt sale not sold my IRR calculation is a little out of whack… Hopefully Prosper will create the loan status of “Charged Off” and remove those accounts from my balance which will them cause my IRR to be a clearly representation.

Lending stats changed their ROI algorithm which had a severe effect on my LS ROI… I am not sure the new number is comparable to any previous reading, but I will continue to track it anyway…

Anyway, here is a chart of my updated IRR and ROI values…

• RateLadder IRR/ROI Update April 2008 — (2.6%) to 14.37%

• Update of IRR/ROI Values July 2008

• RateLadder IRR/ROI 5/08 Update — (1.35%) to 15.3%

• RateLadder IRR/ROI 3/08 Update — (2.11%) to 13.06%

• RateLadder IRR/ROI Update — (1.07%) to 14.18%

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I have had several bloggers ask for advice on their listings or potential listings…  One of them even joined my group and successfully received a $25K loan at an interest rate he was happy with…

As a blogger the reputation of your blog has meaning for you both in terms of your persona, but also in real financial terms…  I have said privately, that I would lend to any blogger of 1 year duration or longer that placed their blog reputation on the line in the listing…

My offer to any blogger that has asked has been the same…  Write a listing and mention your blog and url and I will endorse and bid on your listing and offer all the tips and assistance I know how to provide in order to get your loan funded and the rate as low as possible… 

While I am still making that offer to any blogger, I thought I would share my tips for creating the best possible listing that anyone can use on prosper to get a loan.

1. There are some credit statistics that are factual and out of your control (current inquires, current delinquencies, etc.).  These are simple related to your circumstance and are difficult to adjust for your benefit by definition…  There are others that you can control namely loan amount and the related DTI.  If at all possible with your statistics that are our of your control, adjust your loan amount and there by your DTI to conform to a portfolio plan slice.  These slices are updating frequently and they can be a moving target (ask deep market… his listing went live at 3 in the afternoon and the slices were adjust that evening.)  Why? because the default portfolio plans have a lot of purchasing power…  (My own listing might have gotten as much as $12K+ in portfolio plan bids in 4 days.)
2. End your listing around 5pm est…  For whatever reason that seems to be the time when more bids are placed.  This leads me to believe this is a time of peak lender activity.
3. End you listing on Thursday (assuming normal weekend and not a holiday)…  This may no longer hold the same power as it once did (due to the $50 instant transfer for Facebook users), but the theory goes…  Any lender transfer  of money occurring between 11:01am est Friday and 11:00am Monday will result in the money being available for bidding on Thursday due to the time it takes for the transactions to clear the bank… Not everyone is a facebook user or has the Prosper facebook application installed and therefore I would still use this tip.
4. Tell you story.  Be truthful and honest and put as much detail into the story as you feel comfortable with…  An expenses breakdown and a list of income amount and sources might help with a lower interest rate.  But only provide what you are comfortable sharing.  Your listing should make sense financially, else why are you getting the loan?
5. Use a relevant picture… Do not you use a picture of someone else’s house or someone else’s blond girlfriend (hat tip to Freakonomics who says that young blond women out sell all other demographics in America).
6. Choose the right starting interest rate… Prosper now provides interest rate guidance.  Use the rate with the best chance of funding. You cannot get a loan if you listing does not reach 100% funded…  The listing will only begin to be bid lower after it reaches 100% funded.
7. Get endorsements from friends and get bids from friends who have endorsed your listing.  I had 14+ endorsements (maybe a bit of overkill) and 11 bids from Prosper friends.  I also have a number of bids from friends that are not confirmed Friends on Prosper.  Try to get at least 3 friends to endorse and bid on your listing.
8. Answer questions.  If a lender takes an interest in your listing enough to ask a question, they deserve an answer.  I answered all the questions asked.  Even the question that involved details of my financial life that I am not comfortable sharing.  I intentionally left out an income and budget breakdown from my listing. I do not recommend this if you are trying for your lowest possible interest rate.  But I simply did not feel comfortable sharing that information (perhaps to my interest rate detriment).  But even then I answer the question politely decline to answer and stating my reasons.

• Prosper.com Loan Listing Rates That WILL Get your Loan FUNDED

• Referral Program Strategies

• RateLadder at Prosper Days Day2

• Reduced Required Rates by 0.5% for All Standing Orders with Rates Greater Than 15%

• Everyday People Listing Update — EP: Paying Off High Rate Loans

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Any regular reader will know that last week I brought my first group listing to the marketplace. (As an aside, a group leader is no longer paid for successful listings and the haven’t been since September 13, 2007: Email To Group Leaders After Recent Changes. I think this was a good change and said so at the time and continue to say so now.)

While I certainly helped to the best of my ability and resources, the borrower did an excellent job of leveraging his social capital…

What social capital?

• He made it know that he had a job that supplemented his income. For him that amounted to as much as an extra $900 a month. By putting his blog on the listing he was not only putting his anonymous credit information and verifiable income on display, but leveraging his online assets. By adding the reputation of his blog to the listing, I think he added to the quality of listing immeasurably. Any blogger with any significant track record that puts their blog reputation at risk is serious about the reasons behind the loan and paying off the loan. (His blog is Deep Market.)
• He leveraged his interactions with me — a long time lender and p2p blogger. By joining my group and becoming Prosper friends and accepting my endorsement on his listing he was able leverage his interactions with me (email and blog comments for around a year) into additional social capital: my endorsement.
• Additionally, he used his blog to advertise his listing: Prosper Loan Listing Review. By offering links and reviews in exchange for bids and reviews he was offering a non monetary but valuable asset in exchange for buzz and bids.

What was the net result? A $25,000 loan at an interest rate he is very happy with 18.5%… His loan was bid down almost 7% from his starting point of 25.45%.

Deep Market, Congratulations and good luck… please keep us up to date with your progress.

• Measuring Social Capital

• Programmer and Blogger Seeks Debt Consolidation Loan

• 8 Listing Strategies to get Best Prosper Loan Rate

• Programmer and Blogger Seeks Credit Score Improvment Loan

• Prosper Days 2008

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• Real Estate Opportunities

• Businesses for Sale Opportunities

• Commercial Real Estate Opportunities

Well another month down… Nothing major happened that would effect my IRR/ROI (like a debt sale.)  It was a fairly uneventful month for my Prosper p2p lending account, but it was a good month…  My ROI/IRR is higher on 4/5 of my tracking indices (it will be 5/6 when the statements are available and I update Quicken.) And my EricsCC ROI is within 4 basis points of last month’s value.

When going through my late loans this morning to build these statistics I noticed 2 things.  One it is now very easy to tell which loans are in bankruptcy vs which loans are in collections.  (3 of my 29 1+ late or worse loans are in bankruptcy.)  The second is a more positive development many (more than I have ever seen before) of my late loans have collections payment pending.  In fact, 1 of my 4+ month late loans has a collection payment pending, 3 out of 7 of my 2 month late loans have a payment, and 2 out of 3 of my 1 month late loans have a payment.  Maybe things are looking up in the collections area?  Time will tell.

Anyway, here is a chart of my updated IRR and ROI values…

• RateLadder IRR/ROI Update April 2008 — (2.6%) to 14.37%

• RateLadder IRR/ROI 6/08 Update — 0.57% to 16.64%

• Update of IRR/ROI Values July 2008

• RateLadder IRR/ROI 3/08 Update — (2.11%) to 13.06%

• RateLadder IRR/ROI Update — (1.07%) to 14.18%

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With the lender statments taht were released this weekend it is possible to update my Quicken ROI…

Last month being a quiet “normal” month one would expect an increase in the quicken value…  My Quicken ROI increased from 8.11% to 8.99%.

• Quicken ROI Update = 11.22%

• RateLadder Quicken ROI Update November 1, 2007

• Quicken Updated To Reflect Borrower Loans In Lawsuit

• Quicken ROI Update = 8.11%

• A Look At the Graphs and Charts from Quicken in My Prosper.com Account

Compared to last month with the initiation of the lawsuits…  This was a quiet month.  My worst number Model IRR degraded and my best number Default IRR improved.  I will update quicken as soon as the lender statement become available.

• RateLadder IRR/ROI 6/08 Update — 0.57% to 16.64%

• The Marketplace Survey for April — More and Better Listing Volume

• Update of IRR/ROI Values July 2008

• Prosper Site Update — Nationwide 36% Except Texas and South Dakota

• RateLadder IRR/ROI 3/08 Update — (2.11%) to 13.06%

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Prosper Lending review has an excellent new article. It combines 11 responses (including both Lending Club, Prosper, and yours truly) to a reader’s question.  It is well done on all front’s.  Here is the question asked:

Reader’s Question: I am in my mid-30’s. I am not rich, but I am pretty good at living within my means and have amassed a small nest egg, which I have slowly invested in different areas. I have some money in a mutual fund managed by Merrill Lynch, some in a similar IRA, some in a decent-yielding savings account (4%) and some, the largest portion, which I keep reinvesting in CD’s. It is this portion that I am looking to try somewhere else, especially with the low CD return rates. Prosper seems like a great place to go, not only because of the higher return but because of the ability to choose whom you are helping.

My one financial question is this - if the loan is paid back slowly over 3 years, whereas a CD is usually short-term, say, 5-6 months on average, just how much better, really, is Prosper’s return rate? Let’s say you have $100k to invest and you have the following three choices:

• a savings account with an APR of 4% (subject to market changes) for 3 years
• a 6 month CD you keep reinvesting in, for 3 years, though, obviously, the market rate will fluctuate each cycle
• an average of 10% ROI for $100k worth of 3 year prosper loans

Not knowing all the fees involved with Prosper, I’m a bit confused as to which of the 3 actually gives you the most money. Obviously, at first glance, Prosper is the best one, but…

Your thoughts on this would be much appreciated. I don’t need liquidity; I just want something with a decent return. I have little faith in the future of the stock market, sensing major shifts in the world’s economy over the next several years. For me, investing is important for the long term, so that by the time I’m old, my money is generating enough money to live on. I’m not sure I’ve found any investment strategy that would bring this about.

Here is my response:

My response to your question sounds like I am talking you out of investing in p2p lending. Nothing could be farther from the truth, but within the framework of your question p2p lending is an unknown and your question does not support investing in an unknown. The returns may materialize and they may not.

As much as I believe that p2p lending will change the world it is an entirely new asset class. You cannot assume the published rates of return will be the actual rates of return. It is different than credit cards it is different from secure debt. I would not recommend putting more than 5% of your overall portfolio in P2P lending. If your 5% of your overall portfolio is less than $2,000 I would not invest in p2p. The tax treatment of a p2p lending portfolio is harsh.

If you are still reading my answer then you may like the rest of my response…P2P lending in fun. It is a wonderful feeling to both help someone and generate a return on your money. It is financial voyeurism…once you start you cannot stop. It is highly addictive and enjoyable to invest in p2p lending, but guaranteed results (or even significant past results) are lacking… Proceed with caution, fully diversify (I think at least 50 loans), and have fun, but don’t bet the farm.

To read the other 10 responses please read the post: 11 perspectives on p2p lending

• Loaning on Lending Club For the 1st Time

• Late Loan #2 is Late Again (2nd month in a row.)

• Get Your Lending Club Loan Documentation Early For a Few Days of Free Money

• Calling for Articles for Next Carnival of Peer to Peer Lending

• The Carnival of P2P Lending #4

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