Today we are sharing performance data for the Prosper portfolio for April 2017.
The estimated return on April 2017 production is 8.04% i, based on the estimated loss assumption of 7.64% ii. The coupon for assets originated through Prosper’s platform in April 2017 was 16.18% iii, an increase of 0.47% from Q1. The increase was driven by a pricing increase in the AA, A, and B ratings, as well as a higher concentration of assets originated in the higher risk grades, which have a higher price.
Additional highlights from the April update include:
- Commensurate with the higher concentration of assets in higher risk Prosper rating grades, the portfolio FICO moved from 707 in Q1 to 703 in April, while FICO scores within each rating grade remained similar to Q1. DTI for 2017 assets remains low relative to 2014-2016 assets.
- 2015 and 2016H1 vintage delinquencies continue to decline and appear to be past their marginal delinquency peaks. This behavior is expected to manifest itself as a decrease in the slope of the associated cumulative loss curves over the next 3-4 months and is a credit positive for these vintages as later delinquency peaks were expected.
- Pre-payment rates for the 2017 vintages are at or above those observed historically. Given that the asset duration is short, the impact of higher pre-payments on loss rates is not as pronounced as those for longer duration assets like mortgage. Prosper is currently running loss forecasts with both high and low pre-payment speeds and continued above trend pre-payment behavior could cause an upward revision of loss rates.
- Early delinquency rates for the 2017 vintages are slightly above 2016H1 target levels. At current delinquency levels the higher coupons for the 2017 vintages are expected to provide asset returns that are higher than the 2014-2016 vintages. To produce lower returns one would need to see delinquency more like that witnessed in 2009-2012. 2017 performance to date is well within those levels.
- 2017 asset returns are expected to be higher than the last few years of originations as a result of the policy tightening and higher pricing introduced throughout 2016. Prosper’s own 2017 performance, in combination with weaker than expected loss performance for large banks in their unsecured portfolios, are signals that we take seriously and may lead to more credit tightening over the course of 2017.
- Cumulative charge offs for 2016Q3 continue to trend lower than 2015H2 and 2016H1 vintages. Prosper believes that targeted policy tightening led to this lower cumulative loss realization.
The Prosper Performance Updates are designed to help our investor community better understand performance trends and to provide them important insights into the trends we are seeing and the information needed to invest through the Prosper platform.
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i Estimated Return by (a) taking the WA Coupon; subtracting (b) the Estimated WA Loss, estimated collection and recovery fees, estimated uncollected interest on charge-offs, and the loan trailing fee (where applicable); and adding (c) estimated collected late fees and estimated post charge-off principal recovery. Individual results may vary and estimates can change. Actual performance may differ from estimated performance, and the information presented is not intended to be investment advice or a guarantee of the performance of any Note or loan.
ii Estimated Loss (also known as Estimated WA Loss) shows weighted average expected annualized loss rate on a loan or a group of loans and is calculated by taking estimated principal loss on charge-offs from such loans. Estimated Loss is provided as an informational tool, primarily to remind investors that it is inevitable that certain loans will charge off and result in a loss of investment capital. Estimated Loss is not a promise of future results and may not accurately reflect actual loss rates. Actual loss rates experienced may be impacted by, among other things, the size and diversity of the portfolio, exposure to any single Note or loan or borrower or group of Notes or loans or borrowers, as well as macroeconomic conditions. All estimates are based on the historical performance of Prosper loans.
iii WA Coupon shows the weighted average coupon on a loan or group of loans and is calculated by (a) taking the weighted average contractual amortization rate for such loans, and subtracting (b) Prosper’s 1% servicing fee.
The data, statements and figures in this post are based on Prosper’s analysis and calculations which, in turn, are based on various data sources compiled and analyzed by Prosper with all reasonable care to ensure they contain no omission likely to affect their import. Neither the analysis nor the underlying data sources have been verified by an independent third party.
This post includes forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management and is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. All forward-looking statements speak only as of the date of this post and are expressly qualified in their entirety by the cautionary statements above. We undertake no obligation to update or revise forward-looking statements that may be made in this post to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
All personal loans are made by WebBank, a Utah-chartered Industrial Bank, Member FDIC. All personal loans through Prosper are unsecured, fully amortized personal loans. Neither Prosper Funding LLC nor Prosper Marketplace, Inc. are registered as an investment adviser with any federal or state regulatory agency. The information contained in this presentation is for informational purposes, and should not be construed as individually tailored investment advice or as a recommendation with respect to any security or investment approach. This presentation has been prepared without regard to the circumstances and objectives of its participants and should not be relied upon as authoritative or taken in substitution for the exercise of judgment by any individual. Each individual should consider the appropriateness of any investment decision having regard to his or her own circumstances, the full range of information available and appropriate professional advice. Prosper Funding LLC and Prosper Marketplace, Inc. recommend that each individual seek independent investment and financial advice concerning any services or investments discussed in this presentation.