2008 February | | P2P Lending, Peer to Peer Lending, People to People Lending P2P Lending News, Information, Borrowing and Lending Strategy

From Prosper:

Thank you for your patience while we have been working through the recent API and XML issues.

The web service API has been re-enabled and we are monitoring it closely. You may notice that the Prosper calculated ROI numbers are temporarily unavailable. We apologize for any inconvenience this may have caused you and are committed to making the ROI numbers available via the XML. We are still running down the issue.

The problems with the XML data have been tracked to the source but have not been corrected yet. We hope to have this corrected soon.

Sincerely,

Prosper

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I have been a member of the Prosper developer mailing listing since the list’s inception… This is the 1st instance of using the list. They made the relevant announcement. Kudos! (it is about time) Here is the email…

Here is a link where you can register for the developer mailing list. :)

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I am now fully recovered from Prosper Days 2008 and starting to get back into the normal swing of things, but before I get to far removed I wanted to write a quick blog post with my thoughts and observations.

First and foremost, it was nice to meet all of the wonderful and intelligent people that I met at Prosper Days.

I was on the blogger panel and the API sessions… I was very impressed with Dave McClure of Master of 500 hats. He was on the blogger panel with me… I wish I had had a chance to speak with him more…

I thought both the 2 API sessions in which I was involved were remarkably well attended and I enjoyed presenting.

Adam (I forget the last name, but I do remember his screen name: FriendsWhoLend) was VERY impressive on the managing large portfolio panel. He clearly understands the challenges and the opportunities in investing in p2p lending. Also on the panel was the CEO of Optalytic.

Unfortunately, I was on an API panel during the collections panel, but I hear that Doug Fuller was impressive. I for one say that he can do whatever he thinks will increase my return with my delinquent loans.

From Chris Larsen’s keynote my takeaway was that certain social capital does matter. (Verified friends with a bid decreases the chance of default… More friends with more bids = less chance of default.) Also I hear the the cure rate of loans in collections doubled on a percentage basis and that there was more work to do in this area.

Steven Dubner was great. He was articulate and engaging — 2 core uses of money Sex and Food. Incentives play a huge roll in behavioral economics.

After demoing QuickSnipe I will now be turning it into a my tool of choice for bidding. Watch this blogs for updates.

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For my ProsperDays presentation this year I will demonstrating bidding with the Prosper API… I have built a quick and dirty bid snipping java program. (This program is not ready for primetime as bid sniping tool, but it is very close and a very effective demo. The reason I say it is not ready is that it lacks memory, meaning that it would bid on the same listing on subsequent passes.)

I think API bidding is the 1st step in a brave new world of Prosper Lending. For one, it easily allows custom models.

So what does this 126 line program do?

It queries the active AA-C credit grade listings… If a listing passes my extended credit filters (hard coded) AND the minimum Prosper calculated ROI values (generated by Prosper and the floor is passed in as a parameter) AND the minimum time remaining in the auction it will place a validation test bid or a real bid.

What are the extended credit requirements of this code? Short answer… very tight.

  • 0 current DQ
  • 0-1 inquires in the last 6 months
  • 0 public records in last 10 years
  • 0 DQ in last 7 years
  • Bankcard utilization between 3% and 80%

Here is the java code (I have contributed this code to the SourceForge Prosper API project). It requires the API classes generated by the Java2WSDL and open source tool by Apache foundation.

package prosper.api; import java.math.BigDecimal;import java.math.MathContext;import java.rmi.RemoteException;import java.sql.Timestamp;import java.util.Calendar;import java.util.Iterator;import java.util.TreeMap; import javax.xml.rpc.ServiceException; import com.prosper.services.ProsperAPI.DefinitionResult;import com.prosper.services.ProsperAPI.Field;import com.prosper.services.ProsperAPI.Listing;import com.prosper.services.ProsperAPI.ProsperAPILocator;import com.prosper.services.ProsperAPI.ProsperAPISoap;import com.prosper.services.ProsperAPI.ProsperObject;import com.prosper.services.ProsperAPI.ProsperObjectResult; public class QuickSnipe{ private String m_Username; private String m_Password; private double m_MinROI; private int m_HoursToGo; private boolean m_PlaceBids; private ProsperAPISoap m_APISoap; public QuickSnipe(String username, String password, double minROI, int hoursToGo, boolean placeBids) throws ServiceException { m_Username = username; m_Password = password; m_MinROI = minROI; m_PlaceBids = placeBids; m_HoursToGo = hoursToGo; m_APISoap = (new ProsperAPILocator()).getProsperAPISoap(); } /** * @param args */ public static void main(String[] args) { if (args.length!=5) { System.err.println(“Usage: QuickSnipe username password minROI hoursToGo PlaceBids”); return; } try { QuickSnipe qs = new QuickSnipe(args[0], args[1], Double.parseDouble(args[2]), Integer.parseInt(args[3]), Boolean.parseBoolean(args[4])); qs.snipe(); } catch (Exception e) { e.printStackTrace(System.err); } } private void snipe() throws Exception { DefinitionResult res = m_APISoap.login(m_Username,m_Password); String token = res.getMessage(); ProsperObjectResult por = m_APISoap.query(token, “listing”, getFieldsString(“listing”,true), “status=2 and (creditgrade=7 or creditgrade=6 or creditgrade=5 or creditgrade=4)”); ProsperObject[] pos = por.getProsperObjects(); TreeMap timeLeftListings = new TreeMap(); for (int i=0; i<pos.length; i++) { Listing l = (Listing)pos[i]; Calendar end = (Calendar)l.getStartDate().clone(); end.add(Calendar.HOUR, (l.getDuration()*24)); long millisToGo = end.getTimeInMillis() – System.currentTimeMillis(); if (l.getNowDelinquent()==0 //my required extended credit and ROI && (millisToGo/1000/60/60)<=m_HoursToGo && l.getInquiriesLast6Months()<2 && l.getPublicRecordsLast10Years()==0 && l.getDelinquenciesLast7Years()==0 && l.getBankcardUtilization().doubleValue()=.03 && ((l.getBidMaximumRate().doubleValue()+l.getROINetDefaultRate().doubleValue()+l.getROIInterestAndFeesRate().doubleValue()+l.getROIServicingFeeRate().doubleValue())>=m_MinROI) ) { timeLeftListings.put(end, l); } } boolean pause = false; for (Iterator i = timeLeftListings.values().iterator(); i.hasNext(); ) { if (pause) // you have to pause to avoid bid throttling {try {Thread.sleep(6000);}catch (Exception ignore){}} Listing l = i.next(); Timestamp startts = new Timestamp(l.getStartDate().getTimeInMillis()); Calendar end = (Calendar)l.getStartDate().clone(); end.add(Calendar.HOUR, (l.getDuration()*24)); Timestamp endts = new Timestamp(end.getTimeInMillis()); long hoursToGo = (end.getTimeInMillis() – System.currentTimeMillis())/1000/60/60; System.err.println(“\n”+startts+” + “+l.getDuration()+” days = “+endts+” | Hours To Go: “+hoursToGo); System.err.println(“Bid on Listing: “+l.getListingNumber()+”\nAt Rate: “+(m_MinROI-l.getROINetDefaultRate().doubleValue()-l.getROIInterestAndFeesRate().doubleValue()-l.getROIServicingFeeRate().doubleValue())); res = m_APISoap.bid(token, l.getListingNumber(), new BigDecimal(50,new MathContext(4)), new BigDecimal(m_MinROI-l.getROINetDefaultRate().doubleValue()-l.getROIInterestAndFeesRate().doubleValue()-l.getROIServicingFeeRate().doubleValue(),new MathContext(4)), m_PlaceBids); pause = true; System.err.println(“Bid Message: “+res.getMessage()); } m_APISoap.logout(token); } private String getFieldsString(String type, boolean authenticated) throws RemoteException { DefinitionResult res = m_APISoap.describe(null, type); Field[] fields = res.getDefinition().getFields(); int count = 0; String s=””; for (int i=0; i<fields.length; i++) { if (authenticated || !fields[i].isAuthenticated()) { if (count!=0) { s+= ","; } s+= fields[i].getName(); count++; } } return s; }}Blog Traffic ExchangeRelated PostsOnline Stores

Many, Many people have asked me if there was an easy way to get the Prosper XML files as CSV (comma separated values). In response, I have build a utility that does just that. I contributed the utility to the Prosper API Open Source Project on SourceForge.

With CSV files you can easily import the files into older versions of MS Access (with access 2007 you can import the xml directly) and various statistics packages (SASS, MatLab). I tried to make the utility extremely easy to use. In that spirit I have also built a single JAR file, which you can download here: ProsperXMLtoCSV.jar. By using the single JAR you do not need to worry about your class path and various other java idiosyncrasies.

Please note that these CSV files are larger than can be opened in Excel. If you do open with excel some rows will be missing.

There are 2 ways to run the jar; however, only one way provides you with feedback during the long process of parsing the XML files and producing the CSV files. So I will only tell you how to run the jar with feedback.

With java 5 or better installed and in your path use the following command line from the directory containing the ProsperXMLtoCSV.jar file…

java -jar ProsperXMLtoCSV.jar ProsperXMLFileLocation CSVDestinationDirectory

  • Prosper XML File Location: this is either the relative or fully qualified path to the Prosper XML file you are trying to parse
  • CSV Destination Directory: optional (if left off the current directory will be used) this is either the relative or fully qualified path to the destination directory for the CSV files

When you run this file you are given an output similar to this (this output was for the private data file)…

If you like this utility consider supporting future open source development with a donation via paypal:

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Prosper Lending Review has published the 4th carnival of P2P Lending. It was the largest p2p lending carnival yet. RateLadder was happy to be included with my article on Prosper Taxes.

Here were my favorite articles of the carnival…

6 Ways To Manage The Risk of Peer to Peer Lending

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With the 1st step in the lawsuits against borrowers being to default the loans, the 1st step in accounting for the lawsuits in quicken requires a sale transaction for the principal balance (Accounting for the New Agency Test in Quicken).

Having entered the transactions my quicken ROI is now 7.29%. As the lawsuits in loan pool play out I hope to see some proceeds which will bring the ROI up.

General Loan Population Vintage Curves Count Late

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As I have talked about before Prosper is going to sue deadbeat borrowers and I have opted to join the suit as opposed to receiving an equivalent to the last junk debt sale buyout. For me this meant giving up ~$30 to remain on the lawsuits of 6 of my delinquent borrowers.

This past weekend I received 6 emails from Prosper informing my that one of my loans had defaulted (I had 6 that are part of the sale). I have been expecting this as Prosper said that the 1st in the process step requires Prosper to become the owners of the loans. For those opting into the lawsuits you receive $0 up front and an unknown future payout. For those taking the junk debt sale price you likely received an accompanying payment. Here is an example of one of the letters…

A few minutes later I received the following email from Doug Fuller VP of Operations at Prosper

I will keep you up to date with anything else I learn as I learn it.

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The following is for reference only. I am not a tax advisor nor am I offering any advice on your taxes. If you have specific questions about your situation you should consult with a tax professional. This information should apply to Lending Club as well. However, since I do not have any form of 2007 statement from them I do not think I can report my LC interest.

Prosper has a page on taxes here.

I will talk about my specific situation and then address a couple of other possible situations.

Interest

From my Prosper provided consolidated 1099 I can see that I earned $981.72 in interest. This interest is reported as ordinary interest on schedule B.

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Defaulted Loans

Here are mine from the consolidated 1099:

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This gives me the sale date and the net proceeds for each loan, but in order to fill out schedule D I will need the presale principal balance and the purchase date. For that I cross reference with year end lender statement and find the following at the bottom of the statement…

When a loan is sold it is handled from a tax perspective exactly like the sale of a security. It will be long term or short term based on the purchase and sale dates.

While I do not have any bankruptcy loans if a loan becomes worthless (as opposed to sold) you may be able to treat it differently.

Late Fee Payments Received

I had $1.71 in late fee payments and it should be reported as other income not subject to self-employment taxes.

Referral Rewards

Referral rewards need to be as other income not subject to self-employment tax. I had $291.88 in referral rewards.

Collection Fees and Service Fees

These are miscellaneous expenses and are subject to the 2% AGI exclusion. I had $36.39 in loan servicing fees and $3.65 in collection fees.

Group Leader Rewards

I did not have any, but it seems like other income. If you choose I think you could report as a business Schedule C and then have the option of reporting expenses against the income.

Did I miss anything? Do you have other interpretations? Please leave a comment.

If you did not get a 1099 that means Prosper did not report your income/sales to the IRS. It does not mean that you can ignore your taxes. You are on your honor to report the income and sales and all the information you need is on the 2007 year end lender statement. (Thanks Adi R for the comment.)

Yes I am doing my taxes this weekend.

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Originally, what brought you to P2P lending and Prosper in particular?

Looking for something different than stocks, bonds, etc and stumbled upon Prosper.com in a blog article (can’t recall where) about the launch. I was intrigued by the concept of lending money to a person who, like me perhaps, needed an alternate means to fund a project whether it was home improvement or life improvement (school, small biz, etc). Prosper seemed to fit a niche I had been looking for where we weren’t ‘all in’ for owning pieces of a company as with stocks or pooled into a non-specific bond. P2P lending really stuck in my head as a serious concept and nothing like it had been implemented on such a scale before. Prosper was the first of many P2P’s and we’ve dabbled in several others such as Zopa.com, Kiva.org and LendingClub.com, but it was the urgency that drove us to lending and actually borrowing came up as well (recently repaid) a few times to fund various projects my wife Heather and I had been working on. We now, amazingly, have more than $10k invested in various P2P efforts, which I wouldn’t have seen coming back in Feb. 2006 if you had asked me.

What was your original feeling on group leader rewards and groups? And when the rewards were eliminated?

Group rewards and groups and general… Oh boy, well, originally I didn’t want to start a group, but I thought to myself, what the heck. So I came up with a group (literally overnight) with a message and it did pretty good for a while. Then it grew, well, a little too big for comfort. Then it collapsed into a heap thanks to poor decisions by some of it’s borrowers. They weren’t solely to blame in my opinion as Prosper was pushy about getting loans in and out as fast as possible. So fast in fact there was a time when there was a week or longer delay in the origination of a loan (remember those days ol’ timers?). Group Rewards were nice, but they weren’t our purpose, nor was the idea of growing into a top group based upon loan volume. IF I could do it all over again… I would not have done a group at all. My biggest mistakes are bidding on people out of courtesy and not based upon credit or merit of the need. I’ve paid for it with many defaults over the past year. I was glad when Prosper eliminated the Group Leader Rewards as it brought some sense of clarity to the role (marketing vs. management) of the GL. The referral program would have been best in the early days. This is one of many reasons why I believe LendingClub.com is setup for long term success since it’s not bloated with overhead costs of a reward program works beyond offering pure growth incentives and isn’t fueled by pushing loans out of personal necessity. GL’s, a few of them, got very pushy and authoritative toward pushing for higher interest rates for their groupies so the loan would fund so they would eventually profit. Unfortunately, the change is likely too little, too late to salvage the group concept at Prosper though. It definitely had potential if it had been kept pure (referral only) from the start though. Glad they’re gone!

At some point in the past your attitude turned remarkably sour toward Prosper. Why?

My changing of loyalty with Prosper came as a result of the handling (mishandling) of the Jessica Wolcott incident. I believe Prosper should have pulled the loan, refunded the bid amounts to lenders and helped prosecute her beyond her current sentence. Instead, they insisted I turn a blind eye to justice and lender sentiment by not going on Inside Edition, NY Post or Fox News any further than was already done when the story broke. I clearly recall Prosper Shira calling me to convince me to not push the issue any further and that it would be good for the community (Prosper’s) if we didn’t smear her any further. In hindsight, I should have followed my gut. Prosper needed the change then as we still see serious mistrust of management for their call on this and other issues of policy. Time has healed many of the wounds for me, for others, they are very much a daily torment. Just the handling of some of the issues that occurred and the banning of people who were just stating the truth… Well, it got out of hand. Lack of communication has always rubbed me wrong, so Prosper, I’m asking, please don’t let this continue. I can’t recall the last time I got just a message from anyone at Prosper just checking up on things. This might be why I don’t care to manage a group any longer since I can’t get any help or replies back concerning issues raised by lenders.

Recently you had made a claim that Prosper had been selling your contact information. Do you still believe that?

Unfortunately I never had a chance to set the record straight on this one since they haven’t ‘officially’ replied to me. Prosper is not likely the only company possibly divulged our information based upon the following… Catherine has yet to reply to me on the record about their findings. However my ‘other’ contact at Prosper.com has told me that they have not sold our data to any third parties, but if they had it would not include any fictitious data or name such as the one we keep there. It would be nice however to hear this from Catherine (you have my email address, use it). This sort of clears it up enough for me to press on with the events of your next question as I trust my ‘other’ contact without condition… My one wish however… Official contact. I hate using back-channels to get information out of people, especially corporations who should know better.

Even more recently, your attitude has shifted again in favor of Prosper. Why? Did anything happen (personally or professionally) to facilitate this remarkable change of stance?

Prosper has had it’s share of dilemmas over the past two years. However, it is now starting to turn the ship back onto it’s intended course with changes in collections, service and tools. Although not perfect, it’s certainly a starting point for positive behavior that could lead to great things happening this year and beyond. A gut-check and realization that we are actually poised to make money this year at Prosper, even after several more write-offs/defaults, made us (Heather and I) look at our goals for this year, five years and all the way up to retirement to see if Prosper fits. We were surprised to find it does fill a place after several days of going over our plans. Lenders should realize that the reason they don’t succeed or find themselves banging their head against the wall is a lack of research and common sense when reviewing a listing. Heather and I spent a few days looking at Prosper data seeing if we could come up with a steady, stable and profitable lending model. We are turning it on next week with a special standing order we cooked up which should produce around 7-9%, which is within the range we are comfortable with for this type of investment long-term. Back to the change of heart though… Prosper was the start of it all for us. We were able to accomplish so much from our borrowing experience that there was almost a sense of guilt that we weren’t doing the same in offering the same opportunity to others. Additionally, the Group Leader Rewards are best kept where they started in our opinion, at Prosper. So we are going to invest them in loans as that was the intention of us even accepting them in the first place. Spiritual changes played a role as well, which is why I have and will again here, publicly apologize to Prosper Shira for any ill feelings or words I may have sent her way over the past year. At the end of the day, we all had our share of mistakes in the early days of Prosper, I accept mine, you should all accept yours and Prosper is working on accepting theirs. My question to those who have issues with Prosper…

If they were to truly redirect their efforts and start listening to you, would you come back and join the renewed beacon of opportunity that I believe is starting to shine again?

Forgiveness is one of the many stepping stones along the road to your success my friends, my partners, my fellow lenders.

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