Last night we released another update to the Prosper site. The most significant change is the way that severely delinquent loans (charge-offs) are now reflected in lender’s accounts. You may also notice a few other small changes that we hope you will appreciate, as I will detail below.
Loans designated as “Charged-offs” after 4 months late
As described in a blog post last week, we have changed the way we report severely delinquent loans from “Defaulted” and “4+ months late” to “Charge-offs”.
As of today, borrowers whose loans are 91 or more days past due (DPD) will receive a “Notice of Acceleration”. The Notice of Acceleration is a warning that their loan will be accelerated in 30 days, meaning the loan will be due and payable in full. If the borrower doesn’t make a payment by the 30 day deadline, his or her loan will then be charged-off at 121 days past due.
This change may not be effective immediately for all severely delinquent loans. In order to roll out this change, for the next 30 days, loans that are 4+ months late that have not already been sold to a debt buyer will continue to be displayed as “4+ months late”. After approximately 30 days, severely delinquent loans will show as a “Charge-off” instead of “4+ months late”. The “4+ months late” status will then be used only in rare circumstances.
When a loan is charged-off, the following things happen:
• To the borrower, the balance is accelerated, meaning it is payable (and collectible) in full.
• To the lender, the outstanding balance of the loan (principal + accrued interest + accrued fees) is frozen into a “Charge-off balance”.
• The loan is taken out of pre-charge-off collections, and transferred to a post-charge-off collection agency.
Once in charge-off:
• The loan cannot return to “Current”. It will remain a “Charge-off”, even if the borrower pays the full balance of the loan.
• Payments made by the borrower are considered “recoveries”, and are applied to pay down the loan’s balance.
Learn more about charge-offs.
AA loan closing fees changed to 2%
The borrower loan closing fee for AA borrowers has changed from 1% to 2%. Listings created on or after September 24, 2008 will be subject to this new closing fee. Learn more about fees and charges.
Minimum loan closing fee changed to $75
The minimum loan closing fee for all borrowers has changed from $25 to $75. Listings created on or after September 24, 2008 will be subject to this new minimum closing fee. Learn more about fees and charges.
We hope you find these changes helpful, and look forward to your feedback. If you have any requests for the next release, please leave a comment.