Archive for the ‘ Support ’ Category

Prosper updates the portfolio plan templates regularly in order to reflect changing risk and interest rate conditions in the marketplace.  It is important that you update your portfolio plans, as these updates include changes to bidding rates based on the most recent loss rate projections.

If plans are not updated regularly, there is a good chance your bid rates will not reflect the current market conditions.  For example, if loss rates have deteriorated, you could be bidding too low, in which case your expected returns may not be high enough for the level of risk you are taking. Conversely, if losses have improved, your bid rates may be too high and you may be getting outbid.

If you used a Prosper template to set up your plans, you must approve updates to each of the plans. If you set up a plan from scratch, you should review the plan and make sure it is still giving you the listings and returns you would like.

Review and update your portfolio plans

Ever since we changed the marketplace performance page from listing old loans as “Defaulted” to calling them “Charge-offs”, and then promising more changes inside lender accounts, we’ve had a lot of questions. Let me try to explain why we’re making this change, how it will look if you’re a lender, and what you can expect going forward.

Performance page changes
In mid-August, we changed the way we displayed seriously delinquent loans on the marketplace performance page, renaming “Defaults” as “Charge-offs”, and moving the “4+ months late” loans into the “Charge-offs” category. Our goal was further transparency in reporting our marketplace’s default rate, and I believe we achieved such transparency.

In our next site update, we’ll be adding even more data to the performance page, separately listing principal payments made before a loan is in Charge-off (4 months late) as “Pre-charge-off payments”, and displaying the total amount collected after a loan is in Charge-off as “Recoveries”.

What does charge-off mean?
In general, a debt or account is considered “charged off” when it is unlikely that further payments will be received. Debts are usually charged off after they remain unpaid for a period of time (e.g., 90 to 180 days). Prosper uses the 120 days as the charge off threshold because loans that become over 120 days past due are eligible for sale to a debt buyer, and we have found that there is a steep drop-off in likelihood of further payments after 120 days of delinquency.

You can think of the new “Charge-off” status as a combination of “4+ months late” and “Defaulted”. A loan is designated as charged-off when it reaches 121 days past due.

The implications of a loan being designated as charged-off are the following:
• The loan’s entire balance (principal, interest and accrued fees) is immediately due and payable in full as of the charge-off date.
• As soon as a loan is charged-off, it remains in collections until final disposition of the loan. Possible dispositions include payment in full, sale to debt buyer, or if the loan is discharged in bankruptcy.
• Although the status of all loans 121+ days past due will be “Charge-off”, you will be able to distinguish the various collection, bankruptcy, and sale “sub-statuses” of charge-offs as they will be visible on the loan detail page.
• Once in charge-off, loans cannot be brought out of charge-off. Payments made by the borrower post-charge-off are considered “recoveries”, and are applied to pay down the loan’s balance, but the loan stays charged-off.

When a loan goes to charge-off, the loan’s balance (principal + accrued interest + accrued fees) will be frozen into a “Charge-off balance” for lenders.

As mentioned above, post-charge-off payments (i.e., recoveries) pay down the lenders’ charge-off balance. From the borrower’s side, however, interest continues to accrue, so there is a possibility (however small) that if a borrower pays off a charged-off loan in full, a lender could receive more than the charge-off balance indicated.

Lender account changes
Inside your lender account you’ll find that loans previously marked as “4+ months late” bucket will now be included in a bucket called “Charge-offs”. You’ll also now be able to see the total number of loans paid in full. A rough approximation of what my lender account will look like once these changes have taken effect is shown at right.

Charge-offs will also be included in the “Net defaults” (now called “Net charge-offs”) total of the lender performance table. If any recoveries are collected, your net charge-off total will go down accordingly.

How are recoveries handled?
A recovery is just a different name for a payment made on a charged-off loan. Post-charge-off recoveries received on accounts that are with a collection agency are subject to collection fees.

In addition to the “Payment history” table, each charged-off loan will have a separate table for the “Recovery history” of the loan. This table will detail the date, amount, and any related fees for any amounts collected after the loan has been charged off.

I look forward to your feedback and further questions.

In my first blog post last week I talked about how I often share the learnings of successful lenders, as well as the teachings of the marketplace results. My job at Prosper is to show lenders how to use Prosper and its various bidding tools.  Here are a couple of other learnings to consider.

I (and the successful lenders I speak with) don’t make marginal bidding decisions. If everything looks great in a listing except that the bankcard utilization is just a tad bit higher than you’re comfortable with, or the loan amount seems too high – pass on the listing. There will undoubtedly be another listing around the corner that does meet your criteria.

How to “price” bids is another topic I frequently discuss with new (and many existing) lenders. The most common challenge lenders face initially is being outbid. This is usually due to bidding the “current rate” which in many cases isn’t competitive.

Lenders can avoid the time and frustration of being outbid by bidding an amount they are comfortable with from the beginning. That way, if they’re outbid they know that they gave it their best shot. The smart ones don’t get hooked into bidding again because it looks like a “hot” listing that everyone else is bidding on.

We have a wealth of information available in the Help section under the Lending topic.

Last, but not least, spend some time on the 3rd party applications:
             

These sites have an amazing amount of information and will certainly assist in your success on Prosper.

You can always call or email us questions. We’re here to help you.

My job at Prosper is to show lenders how to use Prosper and its various bidding tools. I speak with dozens of new lenders at Prosper every day. I often share the learnings of successful lenders, as well as the teachings of the marketplace results.

One of the most critical messages I try to share with lenders is to slow down and bid methodically rather than try and pump out 25 manual bids in a single day. Diversification is usually the next topic that I discuss with lenders. Not simply bidding in small increments, which is important, but also diversifying across credit grades and especially loan amounts.

Some users naturally don’t have the time to spend bidding slowly across many listings, in which case I show them how they can create a Portfolio Plan or employ a combination of manual bidding and portfolio plans simultaneously.

While I understand that the idea of Prosper is really exciting, and combined with the prospect of great returns it can be tempting for lenders to deploy their cash as quickly as they can bid it out. However, bidding and being a successful lender on Prosper is more often a marathon and not a sprint. Furthermore, as a new asset class it deserves some time to be researched and understood. Undoubtedly, we’ve all bid on some listings early on that we look back on and say “if I knew then what I know now, I would have never bid on that listing”.

Get comfortable reading the Credit Profile of every borrower you’re considering bidding on. If you’re wondering why a borrower has 8 inquiries in the last six months use the Q&A feature to ask the borrower. In fact, I personally ask ALL borrowers at least one question before I’ll place a bid on their listing. This is an excellent way to get clarification, additional information not in the listing and to gauge the responsiveness of the borrower.

We have a wealth of information available in the Help section under the Lending topic.

And you can always call or email us questions. We’re here to help you.

It doesn’t seem that long ago that our CEO Chris Larsen made the announcement at Prosper Days 2007 that Customer Support was coming in house to SF. It’s definitely been a challenging but fun 18 months for our department. We are a close knit team that strives hard to provide the best customer service to our community. As a result, we have built a solid foundation upon which we are continuously looking to improve. It’s no secret that with any start up company things can get pretty hectic. However, I feel management has been extremely supportive in dealing with any issues we’ve presented to them — which in turn only makes for a better user experience for all of you.

I’ve worked in support for several different companies in various industries and working here at Prosper has been one of my best experiences. In other companies I’ve worked at, the customer service departments were treated as outcasts which generated this feeling of irrelevance. Here at Prosper, other departments enjoy hearing our feedback. Seriously, why wouldn’t they? We talk first hand with you, the community. Confused about messaging you get or screens that perplex you? If you’ve emailed or called us about it, then we’ve brought it up to someone who’s listening.  (Contact Customer Support.)

Personally, I’m amazed at the improvements we made in such a short period of time. We could not have achieved this if no one was listening. For those of us that were here in Feb 2007, we now catch ourselves saying “Remember when we had to…” I expect a few months from now I’ll be saying that more and that’ll be music to my ears.

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Terence Dela Cruz is member of the Prosper Support Team and looks forward to helping Prosper Members on a daily basis.  He highly recommends the Prosper Tutorials.