Prosper,

This is a much appreciated development. Thank you.

What is the source of alternative funds used to fund new borrower listings? Is there any best guess, understanding Prosper doesn’t have control of the timeline, until lending activity resumes? (3 weeks, 2 months? etc)

On a forward looking note, I would encourage Prosper to set a minimum level of fees on this trading initially until the actual behaviour of this new market is observed and established. A future increase in fees is preferable in helping to establish transparent, market clearing pricing of loans.

Dan,
I’m not Prosper Staff, but have encountered this at Lending Club.
That’s not what it means at all. Go over to the Lending club site for a bit of more info. Currently, you can not bid on anymore loans at all, (go and try…) and that will continue until Prosper can fulfill all the SEC and other regs that they need to for the next step. If Lending Club is any guide, it could be a couple months

Why cant new loans be bid on? Makes no sense. Do banks stop lending when the file? I dont undestand…

The bad part about this is when it does come back online, depending on where you live you may still not be able to bid on loans. That’s what happened to me at Lending Club. In fact, after they came back up, the only loans I can buy are on the secondary market.

Complete scam if you ask me.

This will give me a good chance to build my funds to withdrawel from prosper and do something with it that may make a few bucks. Prosper’s default rate I think is well above 20%

Yes – you will be able to sell your loan in a secondary market managed by prosper. With LendingClub (they came back online this week), after they came back, only residents of like 5 or 6 states were able to buy new loans. If you’re not a resident of one of those states, then you can only buy loans in the secondary market (which right now appear to be 31-60 days late)

I understand what is going on. But I think the notice is too short. May be they should have given a week or two (so that all the current listing either expire or get funded).

Now since LoanIO is operation and LendingClub is back on scene, all the investors will flock to these sites and start bidding.

It may be a good move for these three to combine and create a single pnote trading platform (it will save money and build a transparent market… any takers???).

This will allow the new lenders to see how bad Prosper really is.Feb 2007 loans are 40% late

Yes, it was very annoying to have lending capabilities cut off with no notice. If I had known I would have increased my transfer rate into my Prosper account and gotten a whole bunch more loans before the cut-off. As it is now I have to wait for them to come back online.
The having no notice may have been part of the registration process, maybe some bogus governmental rule that they can’t notify people until they have filed officially. I can almost understand that.
The thing that bothers me the most if the indeterminate period of time that we all have to wait. If we can get periodic updates on the status of the registration and maybe some estimated time that it may be done that would alleviate some of the frustration we all are feeling.
Hopefully Prosper can also tell us what exactly will happen once the registration process is complete. The rumors that Lending Club loaners are no longer allowed to loan unless they are from certain states is, to say the least, disconcerting at best. A confirmation from Prosper that that will not happen once this process is complete would also go far in calming their lenders.

This seems like they are making necessary steps to going public or something? But if that were the case it seems they should have made prospectuses available. Are we sure they are not going public and are in the quiet period?
Definition

The period starting when an issuer hires an underwriter and ending 25 days after the security begins trading, during which the issuer cannot comment publicly on the offering due to SEC rules.

This content can be found on the following page:
http://www.investorwords.com/cgi-bin/getword.cgi?id=4012&term=quiet%20period

I do like the idea of selling off loans to others in case I want to make my loans liquid cash, otherwise you would need to wait until loan is paid. I always thought it would be an idea that prosper would buy loans at some kind of discount for those who wanted cash instead, so this must be the solution to that.

Very sad to see what Prosper is up to. Had enjoyed the site very much, but now I will let my loans mature / or default and leave.

David said, “Why cant new loans be bid on? Makes no sense. Do banks stop lending when the file? I don’t understand…”

There are several rules the SEC looks at to see if something is a security. The rules aren’t hard and fast, but, in general, if it looks like a security, behaves like a security, it probably is a security. A secondary market is one of the considerations, but instruments can be securities even without a secondary market.

Then the SEC considers whether or not there are other regulatory bodies that impose at least as stringent rules as the SEC. Insurance companies, many of which sell various types of Annuities, are subject to insurance regulators in each state so the SEC considers Annuities out of their scope. (The stock insurance companies issue, on the other hand, is under SEC supervision.) Banks and thrifts are subject to the oversight of the FDIC and, depending on how they are registered, the Secretary of the Comptroller of the Currency or state supervision. So a bank ends up having to have its banking arm already under control of the FDIC _before_ it opens for business. Ergo, banks don’t have to freeze their activities because they don’t have a period where their CDs go from unregulated to regulated. Even when a bank decides to sell CDs to dealers to sell to others, those CDs were and continue to be under the oversight of the FDIC.

With Prosper, though, it is a different story. Prosper had decided to affiliate itself with WebBank to get around lending restrictions in most states, but has to abide by the lending rules that govern WebBank. The lending part is _not_ affected by the “quiet period” and, indeed, existing borrowers can continue to post listings.

On the other hand, the selling of loans to Lenders* (actually, loan purchasers), do not fall into FDIC jurisdiction. Many of the rules for determining if the pieces of loans we purchase are securities are true, but the trading rule isn’t true. By creating a secondary market for the pieces of loan, more rules are being met to qualify them as securities. Since these aren’t covered by insurance regulators, nor regulated by the FDIC, they end up being in SEC’s jurisdiction. And since they weren’t formerly regulated securities but will become regulated securities (if the SEC approves), the transition involves a “quiet period” where Prosper’s activities are limited, and limited specifically regarding the security in question. Prosper may still release routine periodic business information, but they are limited on what they can share about the securities that they plan to issue. In this case, since the securities are the loans we agree to purchase from Prosper as part of our commitment when we bid on loans, that activity has to be stopped while the SEC considers Prosper’s application and related materials.

Yes, this “quiet time” can be frustrated, but it is probably better to endure this and come through it with registered securities (and possibly restrictions on “qualified loan purchasers” (e.g., income or net worth limitations) than for Prosper to issue unregistered securities and then be shut down with the lenders* left with nothing. With those choices, I would rather have SEC oversight on registered securities than end up with nothing on loans I had already purchased.

Patience during the “quiet period” is hard, but probably worth it–something called “deferred gratification.”

This is all pretty bad for lenders and borrowers. Like the rest of you, I am disappointed that I did not even get an email notice giving us options. This is something that should be doable and should not be a surprise, for anyone. I guess there are many issues that still need to resolve for Prosper and this business model. I am just glad that I did not put too much of my assets into this thing. I hope for the best but prepare for the worst.

Goodbye Prosper.

I don’t really know much about this whole thing, but if what everyone is saying is true, this really defeats the whole purpose of Prosper. For me, the advantage with Prosper was to be able to take your loan directly to the lenders, so no stupid banks were involved. Or, you could invest in loans to your heart’s content, knowing that you may make money or you may lose it. If this gets to the point that Prosper is unable to do these things except for in a few states, or that the process is changed so that it can’t work this way at all, well … another good idea crushed by the government, likely in an effort to preserve the status quo.