Following up on my last post here are the largest operational changes at the new Prosper.com:
- Minimum credit score requirement is now 640 (up from 520)
- Prosper calculates expected defaults (‘loss rate’) now by using the two factors: the credit score obtained by an external agency and the internal Prosper score (in the past the fore-casted value was based only on external data and way to low)
- There is a hard bid floor (a minimum interest rate set by Prosper) on each loan listing
‘The bid floor is the minimum yield a lender can bid on a listing. It’s not possible to bid any lower. This also affects the minimum rate a borrower can possibly receive.The bid floor for each listing is calculated by adding the national average 3yr CD rate to the minimum estimated loss rate assigned to each Prosper Rating. For example, a B-rated listing with a minimum estimated loss rate of 4.0% is added to a national average CD rate of 2.27%*, resulting in a bid floor of 6.27%.‘
- Minimum bid amount is now 25 US$, instead of 50 US$
- There are several legal changes affecting lenders (e.g. ‘In the unlikely event that we receive payments on the corresponding borrower loans relating to your Notes after the final maturity date, you will not receive payments on your Notes after maturity.‘ – this seems to mean that, if a late borrower who paid more than a year after the date the loan was supposed to be paid back in full, the lender is not credited that amount – but check yourself I might be misinterpreting the meaning)
New Lenders should read the SEC prospectus. Some disclosures might make them wary. Quotes:
- You assume the risk that information provided by borrowers may be intentionally false.
- Status information given on loans between inception and March 31, 2009 shows 31.3% of loans had been at least 15 days late at least once, and 20.1% had defaulted.
- The fact that Prosper will have the exclusive right and ability to investigate claims of identity theft in the origination of loans creates a significant conflict of interest between Prosper and the lender members
That might we necessary legal disclaimers – but if Prosper performs in future like in the past, the risk for lenders will be high and by the prospectus Prosper will exclude liability for all risks spelled out.
I read that Prosper makes all lenders re-sign 6 new legal agreements.