2007 March | | P2P Lending, Peer to Peer Lending, People to People Lending P2P Lending News, Information, Borrowing and Lending Strategy

A new loan funded (Too Much Business / Need to Expand — $9,500 at 20%). I participated via a 2 standing orders (Low Amt Extreme DTI and Low Amt Any DTI) and a manual bid the loan was Autofunding. The borrower had AA credit and 45% DTI. As a reminder my standing orders (and manual bids) only find loans with 0 current delinquencies, 10 or less delinquencies in the last 7 years, and 2 or less public records in the last 10.

With my manual bid I pushed my involvement in this listing to my highest dollar amount yet ($197.15).

With this loan I have $4,347.15 in principal across 66 loans ($65.86 per loan) with an weighted average interest rate of 17.18% and an account value of $4,651.36. Each loan on average is 1.4% of my portfolio with a maximum in any one loan being 4.2%.

Here is the listing:

RateLadder.com Loan

For the readers that believe in reading the actual description without modification:

Here is a graph of all loans on Prosper with AA credit and a DTI of < 45% and Loan Amount $9,500 +/-$5,000 funded in the last 100 days:

RateLadder.com Loan Analysis

Number of LoansAverage Amount BorrowedWeighted AverageStandard Deviation100$7,578.619.16%1.38%

The weighted average plus 1 sigma is 10.54%. The weighted average plus 2 sigma is 11.92%. The weighted average plus 2 sigma is 13.3%. The weighted average plus 3 sigma is 14.68%. The weighted average plus 4 sigma is 16.06%. The weighted average plus 5 sigma is 17.44%. The weighted average plus 6 sigma is 18.82%. The weighted average plus 7 sigma is 20.2%. This loan is between 6 and 7 sigmas higher than the mean. Another statistical aberration. It is a new personal record.

Oh yeah. And they are a homeowner.

What do you think?

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This post is attempting to report fact and not make any judgments. If my rational readers have any comments I would love to hear them…

Today my 2 millionaires forum thread (and many other 2 Millionaires threads) were locked (no new posts allowed.) My guess is this was done because due to complaints by 2 millionaires. I tried to have nonincendiary open dialogue. But both sides are very very quick to flame… There are reports of 10 or more people being banned from the forum. I have not been banned.

Here is what Prosper Brian said when locking the thread:

Here is a link to the thread: http://forums.prosper.com/index.php?showtopic=22124

This thread talks about banned members: http://forums.prosper.com/index.php?showtopic=22451. Here is the email they recieved:

Also, in response this thread was started calling for reporting 2 millionaires: http://forums.prosper.com/index.php?showtopic=22468

And I have decided to copy the text in case the thread is removed…

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A new loan funded (cash for small business — $25,000 at 14.5%). I participated via a manual bid the loan was Autofunding. The borrower had AA credit and 1422125% DTI (undocumentable income). As a reminder my standing orders (and manual bids) only find loans with 0 current delinquencies, 10 or less delinquencies in the last 7 years, and 2 or less public records in the last 10.

With this loan I have $4,150 in principal across 65 loans ($63.85 per loan) with an weighted average interest rate of 17.18% and an account value of $4,651.36. Each loan on average is 1.4% of my portfolio with a maximum in any one loan being 3.2%.

Here is the listing:

RateLadder.com Loan

For the readers that believe in reading the actual description without modification:

Here is a graph of all loans on Prosper with AA credit and a DTI of < 1422125% and Loan Amount $20,000 +/-$5,000 funded in the last 100 days:

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Number of LoansAverage Amount BorrowedWeighted AverageStandard Deviation57$20,570.1811.65%2.65%

The weighted average plus 1 standard deviation is 14.3%. The weighted average plus 2 standard deviations is 16.95%. This loan is between 1 and 2 sigmas higher than the mean.

Oh yeah. And they are a homeowner.

What do you think?

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So far no retort from the forums… I had hopes that one of the regulars would have come through with a clean, non incendiary post…

I hope that everyone found the series on groups and community payments interesting… As for me… I didn’t understand the arguments against 2 millionaires in the first place. That is why I started the thread. I gave him a soapbox and he took full advantage. I hope the forum reciprocates on my soapbox offer…

I only wish 2 millionaires hadn’t felt the need to lash out in his posts… His attacks on his attackers only cheapened the debate. I guess I hate mud slinging in general. The fact, that RateLadder was used as a platform for mudslinging bothers me…

Regardless, Be Prosperous.

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Permission is granted to anyone to publish this message about the Two Millionaires groups on www.prosper.com unchanged, in it’s entirety. It is a response to an inquiry from Kevin at www.RateLadder.com
The question is: “Do you care to respond to the allegations (in the Prosper Forums) that your technique (community payments) is a ponzi scheme and can’t succeed monetarily as a long term strategy? As a mega group it will be very difficult to maintain your 5 star rating indefinitely in the onslaught of HR defaults.”
Response from a Two Millionaires Group Leader:
There is a very small gang of people who dominate the Prosper forums with their own dated lender-oriented point of view by posting thousands of messages, many of them or the signature lines promoting their own and their friend’s self-proclaimed “good” groups.
For several months they have tried to damage my, my wife’s, and our groups’ reputation, resorting even to falsely labeling me mentally deranged and a fraud and criminal. I have taken certain steps to defend myself against libel, but your question refers to another of their attempts in the effectively unmoderated forums to accuse me (and in this case Prosper Corporate) of a criminal offense.
Here is the Wiki definition of a Ponzi scheme:
“A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns (“profits”) to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business.”

http://en.wikipedia.org/wiki/Ponzi_scheme

Community Payments, a program instituted by Prosper Corporate and available for anyone to use, does not in any manner fit the definition of a Ponzi scheme.

The reference on the forums is just another unsuccessful attempt, in my opinion, to try to drive people away from the Two Millionaires groups, and I suppose towards the “good” groups as defined and promoted by the little forum gang and their devotees. Followers apparently believe what the leaders say about Two Millionaires, and hop on to what they perceive to be a popular bandwagon, to attack the Two Millionaires group leaders and harm or poach the members of their groups.

The vicious month’s long attacks have resulted in some lenders shunning the Two Millionaires groups and thus being deprived of many investment choices. The Two Millionaires groups consistently run more than 200 listings, many of them from high credit grade borrowers. Many of those listings are quickly filled by the thousands of lenders who have not been influenced to their harm by the forum gang.

So, a Ponzi scheme? Definitely not! Prosper would be shut down if it created fraudulent programs and encouraged criminal offences.

But in the long run, community payments if made only by the group leader are unsustainable in a megagroup that services HR and E borrowers. Unless the star system is changed (as it likely will be this summer) the stars will eventually fall for the Two Millionaires mega group of almost 8,000 people, and they will be buried uselessly beneath groups that have maybe 10 members, zero listings, five or fewer loans, and no sign of an active group leader who is capable of or willing to respond to hundreds of messages each day, and effectively serve thousands of people in the Prosper community.

However, the other Two Millionaires group, also five stars, is now third from the top!

So decide for yourself how this is likely to play out, in spite of the forum gang’s relentless rants…

More information is available at http://www.2mils.orgTwo Millionaires Website
Two Millionaires on Prosper.com March 26, 2007

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Permission is granted to anyone to publish this message about the Two Millionaires groups on www.prosper.com unchanged, in it’s entirety. It is a response to an inquiry about why we make community payments, from Kevin at www.RateLadder.com
The question is: “Why are you making community payments? Can I publish your response?”
I do a lot of online promotions for my Prosper business, including paid ads. I also have a private website http://www.2mils.org that has attracted as of a few minutes ago as I write this on March 26, 2007, 14,333 unique visitors and 388,312 hits. My wife and I have also put an enormous amount of time into developing and growing our Prosper business. So we are ultimately looking for a goodly financial return on it, and are positioning our groups for that if Prosper grows to eBay-like proportions as is possible.
Every other group leader on Prosper has the potential to do the same; it’s a level playing field, everyone has the same tools, including community payments, but some seem to prefer to spend their time writing in the forums and putting down what we are doing instead of developing their own group, if they have the desire to grow. (If they don’t want to grow why do they have such huge signature lines advertising their group in every message they post in the forums?)
My wife and I have enjoyed great success in the few weeks we’ve been involved as Prosper group leaders and lenders, having grown our groups from zero to 8,000 members (the largest group ever), achieved 5 star status for both, and assisted with more than 500 verified loans for a combined value of about 2.4 million dollars to our borrower members’ and lenders’ benefit. And that in spite of intense opposition from a few determined possibly jealous enemies on the forums, some of whom are fellow group leaders who have a potential financial interest in destroying our groups’ reputation if they think that would bring more members to their own self-proclaimed “good” groups.
As you may be aware, just because we send thousands of people to Prosper, including word of mouth recommendations from satisfied group members, that doesn’t necessarily mean they will find our Two Millionaires groups or join them. Our time and money would be potentially wasted if we did not keep at least one Two Millionaires group at or near the top of the all-important “Browse all Groups” search where most new borrowers go to find a group regardless of how they were referred to Prosper.
Our megagroup has such a large portfolio of loans, many of them made to HR and E graded borrowers, that it is inevitable that some of the loans will go bad. The star system quickly buries groups that do not keep five stars. So, to keep our stars and our visible presence to new borrowers, we make community payments. We make most of them ourselves, but other anonymous donors sometimes get to them first and make the payments. (I’ve even had borrowers ask unsolicited if they could help with community payments.)
That’s the major reason we make community payments, to keep our groups’ five star status so we will be quickly found by the people we refer to Prosper, and by other people who come to Prosper because of media attention, many of whom just want to jump in and get a loan as quickly as possible, and do not want to have to sift through a list of 3,000 groups to find a suitable place to get help.
Someone’s got to help the masses of new borrowers or many will give up in frustration, or list poorly and then give up, and leave. The small groups can grow to mega if the leaders work at it as my wife and I have worked at it. But in the meantime they are probably not equipped to or willing to process several hundred messages a day, and to serve HR and E borrowers as we do.
Yes, you and anyone else is welcome to copy and paste this into their blog or website, but only in it’s entirety and unmodified. I’m totally tired of the ceaseless attacks we get in the Prosper forums from a few fellow group leaders and lenders who influence and embolden devotees and new Prosper members because they post so many dubious messages as if they were fact. The facts are that Prosper is so new and so unique that there are no genuine experts, we’re all making it up as we go along, some of us positively, and others trying to tear down someone else’s work.
I’d be very willing to participate in the Prosper forums if they were moderated properly and everyone had to stick to the established but unenforced rules of courtesy and respect. As a leader of Prosper’s largest group, I think I have things of value to contribute as Chris Larsen’s magnificent dream continues to unfold.
More information is available at http://www.2mils.orgTwo Millionaires Website

Two Millionaires on Prosper.com March 26, 2007

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My own feelings are that groups shouldn’t matter to lenders… There is a vocal bunch that claim only good groups matter… I personally think the only place for groups is in borrower generation and education. Source new borrowers and educate any borrower. And get paid for it. Personally, I wouldn’t mind having an affiliate account.

That being said… I caused a minor uproar on the forum today by suggesting that I don’t care that a GL is buying a 5 star rating because it doesn’t affect my lending decision. The target of the posts was the 2 millionaires.

I decided to talk straight to the horse. I have their answers to

and

I will be publishing their responses, but I thought I would give the uninitiated a chance to catch up… I should warn my readers there is bad blood on both sides of the argument and neither holds any punches. It is fascinating reading.

Here is the forum thread I started today: http://forums.prosper.com/index.php?showtopic=22124. It has some links to additional background threads.

Check back tomorrow to hear from the 2 millionaires.

p.s. for a sneak peak check out the comments on my post from this morning (2 millionaires and leporello… a good summary of both sides: http://rateladder.com/2007/03/26/two-millionaires-keep-5-star-group-rating-with-community-payments/

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Groups on Prosper are in theory meant to help borrowers through education and lenders through lower default rates. I have explored these aspects of groups before: Why Would a Borrower Join a Group? and Why Would a Lender Join a Group?. In this post we will examine the group Two Millionaires.

Two Millionaires is actually two different groups, with the group leader of each being one of the original two millionaires. They claim completely altruistic motives including that they will bid on your loan to help get you funded. Their main claim is

They are one of the largest groups on Prosper and so far have obtained over 2.25 million in loans for borrowers. As, group leaders they earn rewards. Fair enough.

They have a 5 star group rating which means, by definition, that their loans are less likely to default. (Personally, I am skeptical of what true meaning can be derived from a star rating, but …)

Prosper has a community payment feature. It allows any lender on a loan or a group leader (or member) to make a community payment on behalf of a borrower. The groups leaders (the two millionaires) use this feature to prop up their group rating. That is, they make community payments on behalf of their borrowers to keep them from technically defaulting.

Continue reading →

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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.

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Lazy man gives a frank and honest assessment of his early days lending on Prosper: Prosper Mistakes I’ve Made.

Personally I took a far more conservative path to my lending strategy and I have done far better with my early loans. I am not saying that I was any smarter about my loan selection, I was simply more cautious (risk averse). My portfolio only just added an E a couple of weeks ago (I have no HR or NC). And the large bulk of my loans are in AA-C.

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