November Prosper Marketplace Survey Released | P2P Lending, Peer to Peer Lending, People to People Lending

Prosper released the November marketplace survey and coresponding comentary from Chris Larsen…

I particularly like the insight in the last paragraph…

Here is the entire press release from Prosper…

People-to-People Lending: Strong Demand for Prime & Near Prime Loans

SAN FRANCISCO–(BUSINESS WIRE)–Prosper.com(www.prosper.com), America’s largest people-to-people lending marketplace, today released its October People-to-People Lending Market Survey. In this month’s market commentary, Prosper Chief Executive Officer and co-founder, Chris Larsen, discusses the impact the dynamics of the broader credit markets and Fed rate cuts are having on the Prosper marketplace.Prosper’s People-to-People Lending Market Survey is released on the second Tuesday of every month. To register to automatically receive the survey, send an email with “SUBSCRIBE” in the subject line to: p2plendingmarketsurvey@prosper.com.

October 2007 Prosper People-to-People Lending Market Survey

Membership and Loan Volume Statistics

October
2007

October
2006

2007
Year-to-Date

2006
Year-to-Date

Since
Inception

New Members35,27520,552334,824100,232472,591Funded Loans

$6.4 million

$3.8 million$68.4 million$20.5 million$96.9 millionAverage Loan Size$6,871$5,107$6,975$4,808$6,141Daily Average Number of Borrower Listings2,5161,7372,2458771,454

Estimated Annual Return on Prosper Select Index

October 2007Prosper Select Index9.28%Prime Select Index9.09%Near Prime Select Index9.35%Sub Prime Select Index10.45%

Average Borrower Rates on Prosper Select Loans

October
2007

September
2007

October
2006

2007
Year-to-Date

2006
Year-to-Date

Since
Inception

Prime Select Loans9.50%9.98%10.93%9.97%10.68%10.09%Near Prime Select Loans16.79%15.83%16.45%16.02%16.21%16.12%Sub Prime Select Loans19.63%24.86%24.44%23.22%25.01%23.79%

Mix of Funded Borrowers

October
2007

October
2006

2007
Year-to-Date

2006
Year-to-Date

Since
Inception

Prime37%22%30%25%29%Near Prime56%50%57%50%55%Sub Prime7%28%13%25%16%

Noteworthy

Top Lender States

1) California2) Texas3) New York4) Florida5) Illinois

Market Commentary by Chris Larsen, Co-Founder and Chief Executive Officer of Prosper

In last week’s Wall Street Journal article “Interest Rates Defy Rate Cuts,” James Bianco, president of Bianco Research LLC, a market-research firm in Chicago said, “Even though the Fed has eased three-quarters of a percentage point since September, the market has only gotten between 0.25% and 0.50% of that easing. If you look at it from a saver’s and borrower’s side, it shows you that the market is still not functioning properly.”

Although borrower rates and lender rates of return on Prosper are not formally tied to moves by the Fed, the dynamics of the broader credit markets, which have led to a string of rate cuts, clearly seem to be having an impact on the Prosper marketplace. For example, in October average borrower rates for all Prosper prime loans and Prosper Prime Select loans were 12.27% and 9.50%, respectively; down 0.39% and 0.65%, respectively, since the Fed rate cuts.

Also consistent with broader market conditions is the seizing up of Prosper lenders’ appetite for subprime borrowers. While Prosper continues to remain on a rapid growth trajectory as indicated by year-to-date funded loan volume, which is up $48 million or 233% compared to year-to-date loan volume at this time last year, the percentage of loans going to subprime borrowers continues to decline. In October a mere 7% of loans funded on Prosper went to subprime borrowers. This is in stark contrast to last October when 28% of funded loans went to subprime borrowers. The rapid decline in subprime loans is indicative of a veritable subprime credit crunch in the Prosper marketplace.

The good news is that lenders on Prosper are wisely being cautious given the widespread meltdown of subprime mortgage loans. The bad news is that some subprime borrowers, such as young members of the American military who have not had an opportunity to build up a credit history or are caught in payday loan circles, may not be receiving a worthy chance of funding. Perhaps demand for these types of subprime loans will increase as a result of raising the rate cap on Prosper from 29% to 36%.

While Prosper lenders are shying away from subprime, there is ongoing strong demand for the ever increasing number of prime and near prime borrowers coming to Prosper to consolidate their credit card debt at lower rates and to fund or expand their small business endeavors. For example, in October 37% of loans funded on Prosper went to prime borrowers, compared to 30% in September 2007 and 22% in October 2006.

Of great interest is the anecdotal evidence of prime and near prime borrowers turning to Prosper for loans that would have historically been steered toward mortgage, auto, and home equity lenders. It will be very interesting to watch whether the wake of the liquidity crisis in the broader credit markets results in a definitive trend toward Prosper becoming an alternative source for financing down-payments on homes and cars, funding home remodeling projects, and finding relief from high-interest adjustable rate mortgages (ARM’s). Equally of interest is whether Prosper lenders will desire to help their fellow Americans by funding these types of loans.

Definitions

2007 Year-to-Date: January 1, 2007 through October 31, 2007.

2006 Year-to-Date: January 1, 2006 through October 31, 2006.

Since Inception: November 1, 2005 through October 31, 2007. 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.

Prosper Select Index: The Prosper Select Index return is the estimated average annual return on invested 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 October 31, 2007. 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. Rates shown are interest rates, not annual percentage rates.

Mix of Funded Borrowers: Prime includes AA and A credit grade loans (credit scores of 720+). Near Prime includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes E and HR credit grade loans (credit scores below 600).

About Prosper

Prosper (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 480,000 people from across the country. Since launching in February 2006, over $98 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.

Contact:

Prosper Marketplace, Inc. Tiffany Fox, 415-593-5416 Communications Director tiffany@prosper.comRelated posts:

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