Here are the results of the debt sale as reported by Prosper:
Debt Sale Weighted Average Prices
- Homeowners - 12.5%
- Non-homeowners - 7.3%-9.6% depending on credit grade (NC was 4.8%)
- Texas (all) - 3.5%
Showing posts with label homeowner. Show all posts
Showing posts with label homeowner. Show all posts
Thursday, December 27, 2007
Debt sale on Prosper: 701 loans
701 defaulted loans have been sold to debt buyers for prices ranging from 2.8% to 14.5% of principal. This is the largest debt sale on Prosper with more than twice as many late loans sold as the previous largest debt sale three months ago.
Here are the results of the debt sale as reported by Prosper:
Here are the results of the debt sale as reported by Prosper:
Wednesday, August 29, 2007
309 late loans sold in Prosper debt sale
Over the past week Prosper conducted their third debt sale. Prosper's policy is to default loans and sell them once they are more than 3 months late. However, in order to conduct a debt sale they need to pool a significant number of loans together to attract the needed buyers. This results in infrequent consolidated debt sales of loans that are anywhere from four to ten months late on payments.
The first debt sale was in Dec 2006 with 51 loans sold.
Here are the details from this third sale:
In the second Loan sale it seems the primary determining factor was homeownership, and some lenders had changed their bidding strategy to factor that in. One lender who goes by the name of PrintAns commented in the Prosper forums, "I hadn't viewed homeownership as good or bad when picking the listings until the last bad loan sale. When they sold bad loans more was given for loans where the borrower was a home owner. I now use home ownership part of my criteria."
In a way it seems unfair for Prosper to be changing the rules of the game, but in reality it is the debt buyers that change their criteria and the amount they are willing to pay for different types of loans based on the changing economic conditions in the marketplace. It probably doesn't help that liquidity for all types of debt purchasing has been drying up throughout the economy.
John Witchel, Prosper's CTO, commented about the debt sale process on his blog several months ago. He specifically mentions two challenges they face in these debt sales. The first is that Prosper is a new and different asset class, and the debt sales are typically geared more toward established asset classes like credit card debt. The second challenge is volume. It takes a certain volume to attract debt buyers, which is the primary reason for the infrequent timing of the debt sales.
The first debt sale was in Dec 2006 with 51 loans sold.
- 27 - 30%: Homeowners with any credit grade
- 15 - 18%: Non-homeowners with a credit grade of D and above
- 3.0 - 3.7%: Non-homeowners with a credit grade of E and HR
- 16 - 19%: Homeowners
- 2.4 - 3.3%: Non-homeowner
Here are the details from this third sale:
- Eligible loans were 122 days past due as of July 26, 2007, provided the loan was not part of any bankruptcy filing
- 309 loans were sold
- Price range: 1.8% - 26% as a percent of principal balance
- AA-A = 23%
- B-D = 13.3%
- E, HR, NC = 8.1%
In the second Loan sale it seems the primary determining factor was homeownership, and some lenders had changed their bidding strategy to factor that in. One lender who goes by the name of PrintAns commented in the Prosper forums, "I hadn't viewed homeownership as good or bad when picking the listings until the last bad loan sale. When they sold bad loans more was given for loans where the borrower was a home owner. I now use home ownership part of my criteria."
In a way it seems unfair for Prosper to be changing the rules of the game, but in reality it is the debt buyers that change their criteria and the amount they are willing to pay for different types of loans based on the changing economic conditions in the marketplace. It probably doesn't help that liquidity for all types of debt purchasing has been drying up throughout the economy.
John Witchel, Prosper's CTO, commented about the debt sale process on his blog several months ago. He specifically mentions two challenges they face in these debt sales. The first is that Prosper is a new and different asset class, and the debt sales are typically geared more toward established asset classes like credit card debt. The second challenge is volume. It takes a certain volume to attract debt buyers, which is the primary reason for the infrequent timing of the debt sales.
Tuesday, July 31, 2007
Are non-homeowners a safer lending risk in a declining house market?
With all the recent troubles in the housing market, some lenders are starting to ask whether homeowners are a higher risk than non-homeowners when lending on Prosper. In the housing market the biggest problem homeowners are facing is when ARM or adjustable rate mortgages reset at higher payments and higher interest rates after the initial one to seven-year fixed term. When combined with falling house prices, borrowers are sometimes unable to refinance their mortgage since they owe more on their house than it is worth. These borrowers are stuck with a house they cannot afford and cannot sell for the amount of their mortgage and are forced into foreclosure. Because of these deteriorating market conditions, some lenders have started asking borrowers whether they are in a fixed mortgage or whether they have adjustable rate mortgages (or ARMs). Others have taken to the forums to list the reasons they won't invest in loans related to real estate deals.
To get an idea of how the stats look in Prosper, I pulled one year of Prosper Marketplace data for loans from March 28, 2006 through March 28, 2007. Four months have passed since the end of the data range which gives all of the loans a chance at going late. Auto-fund loans were also excluded from this data. Here is a table that shows default rates for home owners vs default rates for non-homeowners for this one year time period.
What this data suggests is that homeowners in Prime or near-Prime credit grades have higher default rates than non-homeowners. In the sub-prime markets homeowners are actually a better risk than non-homeowners. This data came as a surprise to me. With all the news about problems in the sub-prime mortgage industry I had assumed that sub-prime homeowners would be at an increased risk for default.
Personally I don't pay too much attention to home ownership as a criteria when deciding whether or not to fund a loan. Without being able to see the terms of the mortgage or the borrower's equity position, it is difficult to gage what effect the mortgage will have on the ability to repay the Prosper loan. Some borrowers will include this information in the description of the loan or in answers to questions. However, there is no verification of the information in those sections, so I do not trust that it is accurate. It would be too easy for the borrowers to write what they thought the lenders want to hear - especially in answers to leading questions.
In the higher credit grades the higher default rate might be partially compensated for by the difference in the amount of money recovered in debt sales for defaulted loans. When these sales have occurred, loans for homeowners at higher credit grades have been sold for as much as 25 or 30 cents on the dollar compared to pennies on the dollar for non-homeowners. Also, with this data being from the very early stages of the house market decline it may be too soon to tell what the overall effect will be on the Prosper marketplace.
To get an idea of how the stats look in Prosper, I pulled one year of Prosper Marketplace data for loans from March 28, 2006 through March 28, 2007. Four months have passed since the end of the data range which gives all of the loans a chance at going late. Auto-fund loans were also excluded from this data. Here is a table that shows default rates for home owners vs default rates for non-homeowners for this one year time period.
| Credit Grade | Homeowner Defaults | Non-Homeowner Defaults |
| AA | 0.81% | 0.58% |
| A | 3.23% | 1.29% |
| B | 5.10% | 3.46% |
| C | 9.12% | 6.58% |
| D | 12.93% | 7.52% |
| E | 16.75% | 20.79% |
| HR | 29.49% | 41.89% |
What this data suggests is that homeowners in Prime or near-Prime credit grades have higher default rates than non-homeowners. In the sub-prime markets homeowners are actually a better risk than non-homeowners. This data came as a surprise to me. With all the news about problems in the sub-prime mortgage industry I had assumed that sub-prime homeowners would be at an increased risk for default.
Personally I don't pay too much attention to home ownership as a criteria when deciding whether or not to fund a loan. Without being able to see the terms of the mortgage or the borrower's equity position, it is difficult to gage what effect the mortgage will have on the ability to repay the Prosper loan. Some borrowers will include this information in the description of the loan or in answers to questions. However, there is no verification of the information in those sections, so I do not trust that it is accurate. It would be too easy for the borrowers to write what they thought the lenders want to hear - especially in answers to leading questions.
In the higher credit grades the higher default rate might be partially compensated for by the difference in the amount of money recovered in debt sales for defaulted loans. When these sales have occurred, loans for homeowners at higher credit grades have been sold for as much as 25 or 30 cents on the dollar compared to pennies on the dollar for non-homeowners. Also, with this data being from the very early stages of the house market decline it may be too soon to tell what the overall effect will be on the Prosper marketplace.
Subscribe to:
Posts (Atom)
Posts
