Prosper's delinquent debt situation

On May 2nd, Doug Fuller provided a Debt Sale Update to lenders, explaining why Prosper delayed their scheduled debt sale. In a nutshell, Prosper believes that, although it has received a record number of bids, the offer price was too low. When asked, Doug suggested that the offer price was ⅓ of the previously offered price.

Prosper lists the results of past debt sales on their website. Now personally, I find that table a little bit confusing. So I used Excel to try and rearrange the data a little bit to see if I could get some clarity:



Hopefully the Dec '06, May '07, Aug '07 and Dec '07 columns are self-explanatory. They are from the Prosper table referenced above. The Current Offer column is extrapolating ⅓ of the previously (Dec '07) offered rates. I then used the Prosper Performance page to get the amounts outstanding in each category that previously had bids.

The amounts are overly optimistic. I found no way to separate out the debt to Texas borrowers that is worth a lot less than any other debt, nor to identify the number of loans in bankruptcy status. For bankrupt loans, lenders will receive absolutely zero, since Prosper cannot sell them and I suspect in most cases Prosper will not recover any funds from bankruptcy proceedings either. Even if the borrower filed bankruptcy too soon after taking out the loan and the loan may thus be exempted from the bankruptcy, Prosper has to file paperwork and it is not in any agreement that I have seen that Prosper will represent lenders at the bankruptcy proceedings - nor has Prosper volunteered that they do.

Leaving this aside, the potential amounts that Prosper can recover money on from the bad debt sale is thus listed in the Amount column.

Next up is the Estimated Recovery column - this is simply the putative offer price multiplied by the outstanding amount. The Max Recovery column reflects the recovery if Prosper gets very, very lucky and debt buyers again offer the same for the debt that they offered in Dec '07. Note however, that in all the preceding sales, the amount offered showed a decline from the previous sale event.

At best, lenders stand to recover between 10.5% and 3.5% of the currently delinquent $6.6 million.

For Openers

Today I got an email from Prosper. Oh wow.

Since Prosper made the daily data downloads available, I've been digging into the data to see what interesting tidbits I could gleam from it. Some of the data I've even posted to the Prosper forums to share with my fellow forum denizens. Well, some of the data has been highlighting a problem in Prosper's processing of completed listings and turning them into loans. Many loans seem to hang in limbo for more than two weeks. (I'll talk about this problem later).

Back to the email from prosper. It was from a name I've never heard of before, John Lucena. Uh oh! Did I violate the terms of use? So being the ninny that I am, I first opened all my other mail. Then I figured that this can't bite me, I'm just going to open it and look at the email. If they're angry, they'll surely give me a chance to stop before they throw the book (and their lawyer) at me.

Lo and behold, John wants me to blog and include my analyses in the blog. He wants to link to this blog from a forthcoming Prosper page.

Wow, well, I was pleasantly surprised. In 2003, just after I came out of the hospital, I created a blog, my "feel good" blog that was named after the "feel good" card my daughter drew for me. But, I've only twice blogged on it, never publicized it anywhere and even worse, I had hosted it on servers at my now ex-ISP's website. So effectively, the blog was lost to posterity and with it it my searing insight and wisdom captured in those two posts. NOT. Frankly, I have no idea what I posted, I was too sick to remember. The only reason I remember the details I share above is because I gleaned them from Blogger when I tried to log in. The actual posts were already long gone.

So I'm trying this out. I'm going to create this post and then perhaps one more with some statistics from Prosper's data and then see how I feel about it. If people like it, fine, I'll keep up with it. Perhaps it's time for me to learn how to blog anyway.

Now what to call my blog? I'm bad with names, always at a loss to pick an interesting handle for myself. That's why I'm registered at Google as, well, whatever I'm registered as. That's why I'm HollowOak at Prosper. Another story for perhaps another time.

But I just thought of a name - "Money Walks". I'll go see if that is available. If you can think of a snappy title, feel free to suggest it.

Now my grammar is poor. If I make a grammar mistake, please point it out to me, I need to improve. Spelling, feel free to laugh at me as I have Google spellchecker on my toolbar.