SAN FRANCISCO (PRWEB) May 13, 2008
April 2008 Prosper People-to-People Lending Market Survey
Prosper's People-to-People Lending Market Survey results are released the second Tuesday of every month. To register to automatically receive the survey, send an email with "SUBSCRIBE" in the subject line to: firstname.lastname@example.org.
Market Commentary By Prosper Co-founder and Chief Executive Officer, Chris Larsen
In April, we saw the supply of loan listings with an attractive risk-return tradeoff hit an all time high and approximately double compared to the prior month. At the end of March, the supply of loan listings with an attractive risk-return tradeoff was approximately $5 million; and at the end of April the supply increased to approximately $11 million and has remained at that level into May.
This significant increase in the supply of loan listings with an attractive risk-return tradeoff is attributed to the fact that on April 15 we commenced our business arrangement with WebBank, a Utah-chartered industrial bank. Through our agreement, all loans originated through the Prosper marketplace resulting from listings posted on or after April 15, 2008 are made by WebBank under its bank charter. Prosper provides services to WebBank in connection with the origination of such loans and Prosper services loans made to Prosper borrowers on behalf of registered Prosper lenders who purchase such loans. In effect, this partnership opened the platform to more borrowers, who may have previously been constrained by low state rate caps.
Also in April, we saw the supply of prime borrower listings hit an all time high, accounting for nearly half of all loan listings in terms of dollars requested. Prime borrower originations also reached its record level of 43% of funded loans.
Currently, the significant increased supply of quality listings is providing more attractive bidding opportunities, which is making it easier for lenders to efficiently deploy more money onto the platform.
Mix of Funded Borrowers
Prime 43% 30% 41% 28% 33% Near Prime 51% 55% 53% 55% 54% Sub Prime 6% 14% 5% 17% 13% Membership and Loan Volume Statistics
New Members 46,312 34,144 154,585 137,849 692,713 Funded Loans ($) $8.5 million $8.7 million $28.9 million $28.3 million $137.3 million Funded Loans (Units) 1,305 1,091 4,379 4,145 21,699 Average Loan Size $6,486 $7,956 $6,607 $6,824 $6,326 Daily Average Number of Borrower Listings 2,744 2,001 2,333 1,866 1,665 Estimated Annual Return on Prosper Select Index
April 2008 Prosper Select Index 8.84% Prime Select Index 8.90% Near Prime Select Index 8.65% Sub Prime Select Index 11.56% Average Borrower Rates on Prosper Select Loans
Prime Select Loans 9.82% 9.86% 10.44% 9.96% 9.88% 10.04% Near Prime Select Loans 15.05% 15.52% 15.46% 15.91% 14.96% 16.04% Sub Prime Select Loans 25.00% 35.00% 25.29% 28.88% 22.60% 24.17% Definitions
Attractive Risk-Return Tradeoff: For purposes of this survey release, listings are considered to have attractive returns if, based on historical loan repayment performance of Prosper borrowers with similar characteristics, they are priced sufficiently to compensate lenders for risk. Risk includes both the risk of non-payment by the borrower and other risks associated with people-to-people lending. In general, as the credit quality of the borrower declines, the range of possible returns widens, requiring a larger risk premium to compensate the additional uncertainty. The amount of risk premium required to compensate for a given level of risk is a subjective judgment. The following formula is used by Prosper to determine if a listing is priced adequately to have an attractive risk adjusted return: Maximum Borrower Rate > Risk Free Rate1 + 3.25% + (Expected Annual Default * 1.5) + Prosper Servicing Fee. All lenders should make there own judgments with respect to what constitutes an adequately priced listing.
1 Risk Free Rate = 2-year CD national rate on BankRate.
Since Inception: November 1, 2005 through April 30, 2008. 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.
2008 Year-to-Date: January 1, 2008 through April 30, 2008.
2007 Year-to-Date: January 1, 2007 through April 30, 2007.
Prosper Select Index: The Prosper Select Index return is the estimated average annual return on 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 April 30, 2008. 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 all AA and A credit grade loans (credit scores of 720+). Near Prime includes all B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes all E and HR credit grade loans (credit scores below 600).
Prosper (http://www.prosper.com), America's largest people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone. Prosper's membership consists of over 700,000 people from across the country. Since launching in February 2006, over $140 million in loans have been funded in the marketplace.
The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper's online auction platform. People who want to borrow on Prosper create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. People who register as Prosper lenders set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. In addition to criteria commonly used by institutional lenders, such as credit scores and histories, Prosper lenders can consider borrowers' personal stories, endorsements from friends, and group affiliations. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan to the borrower. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrowers and lenders.
Prosper was co-founded by Chris Larsen, co-founder of E-LOAN, and John Witchel, technology entrepreneur. Backed by Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital, and Omidyar Network, Prosper has raised approximately $40 million. Prosper's marketplace platform is patent pending.