Loanio to launch soon

Update (12:20PM EST): I've changed the title of this post from "Loanio launches" to "Loanio to launch soon." It appears I may have jumped the gun with the announcement. Myself and others were able to access the site for a brief period this morning. There are some technical changes going on with the domain as Loanio readies itself for an imminent launch. Visit Loanio to check the latest status or review the screenshots we posted two weeks ago.

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Original post: After nearly a year of anticipation, Loanio has finally opened their doors. There are no borrower listings yet but you can sign up as a lender, borrower or co-borrower. Two weeks ago we got a sneak peak and reviewed Loanio. Now you can check it out here.

PA lenders angry over ban

Due to state regulations, Prosper banned lenders from Pennsylvania. This caused an immediate and angry response from Prosper lenders. One started a petition and blog - Pennsylvanians for Prosper Lending.

Many PA lenders left angry comments on the official Prosper blog. Here's a sample:

"I want to express my outrage. I received an email this morning stating that you are no longer allowing bids from registered lenders in PA, and you are also not allowing new lenders from my state as well. The policy in general doesn’t make any sense to me, but more importantly I think all PA lenders should’ve been notified that this change was coming (instead of it becoming effective immediately). I feel like Prosper has slapped me upside the head in the way this situation has been handled. I have previously been very content with the way this site has been run and am more than disappointed in how this situation has been handled." - wyominggirl7

"If Prosper has had ongoing discussions with regulators in Pennsylvania, why didn’t Prosper contact PA lenders sooner? Not only is this announcement a surprise, it’s a wasted opportunity: PA lenders could have contacted their state senators and representatives, not to mention Governor Rendell’s office, to apply some pressure." - DonQ

"I contacted my state rep over this lending issue for PA residents. I imagine that the banks do not like this peer to peer lending and so they lobbied to shut us down. Yes I know, heavy handed government tactics at work again." TeddK

"I suggest you all contact your state representatives and senators as well as the governor. I already have my state rep interested in this issue. I need more information to give him about the what the regulations are and what officials and organizations are involved. I wish prosper had told use sooner so we could have pressured law makers." - Jon P

"Pennsylvania get more ridiculous all the time. I want to continue lending! I have signed the petition mentioned above and will be contacting my legislators right away!" - Mike S

"I just can’t believe this. With all my other investments tanking, you take away the one that I am actually making a good return on. Its crap like this that pushes people over the edge." - Jim C

In response, Prosper has published contact information for PA officials who may be able to influence the decision. They indicate they are primarily in discussions with the Pennsylvania Securities Commission.

Pennsylvania Securities Commission
http://www.psc.state.pa.us/investor/contact.html

Pennsylvania Governor Edward G. Rendell’s Office
http://www.portal.state.pa.us/portal/server.pt?open=512&objID=2998&mode=2

Pennsylvania Open for Business
http://www.paopen4business.state.pa.us/paofb/cwp/view.asp?a=3&q=440975

Pennsylvania House of Representatives
http://www.legis.state.pa.us/cfdocs/legis/home/member_information/email_list.cfm?body=H

Pennsylvania State Senate
http://www.legis.state.pa.us/cfdocs/legis/home/member_information/email_list.cfm?body=S

Market in turmoil

You have seen the news...

Today: Feds rescue AIG with $85 billion bailout

And from the past few days:

"Stocks suffered their worst losses in seven years as the failure of investment firm Lehman Brothers Holdings Inc. and the sudden sale of Merrill Lynch & Co. stoked investor fears of even deeper problems in the nation's financial system." Boston Globe

Greenspan calls this a 'once-in-a-century' crisis. So should you steer clear of stocks right now? The 'experts' seem to think so. This is from an exchange on Larry King Live:

King: Is this a good time to get into the market?

Orman: No. It's not a good time to get in with brand-new money. I would let these markets kind of wash themselves out....Are you kidding? These are the markets that you just sit on the sidelines and wait on the sidelines and stay away from them until everything works out.

Well, I disagree. I think the best time to get in the market is when everyone else is getting out. No one can time the market but I think if you have the right long term investment strategy this is as good a time as any to get in the stock market. Market emotions tend to cause people to make poor investment decisions as illustrated by the following two graphs.



What do you think? Also, does this make peer to peer lending more or less attractive?

Pennsylvania lenders booted from Prosper

Pennsylvania appears to be one of the least friendly when it comes to peer to peer lending. One year ago we reported that Pennsylvania borrowers avoided Prosper due to the low rate caps. Borrowers residing in Pennsylvania could only request loans at 6% and below due to aggressive state regulations. Few lenders were willing to risk their money for such a low return. The situation changed in April when Prosper raised the rate cap for all states to 36%.

Now p2p lending has a new problem in Pennsylvania - lenders are banned. Here's the announcement from the Prosper blog.

"We have made the decision to discontinue accepting new lender registrations, and new bids from existing lenders, from residents of the Commonwealth of Pennsylvania. Our decision to make this change was based on our ongoing discussions with regulators in Pennsylvania, which led us to believe the change was necessary to comply with their current interpretation of their state regulations.

We have notified existing lenders residing in Pennsylvania of this change via email and at the point of signing into their Prosper accounts. Existing lenders residing in Pennsylvania will continue with their existing lender agreements, have their existing loans serviced, and be able to transfer funds out of their Prosper account. However, they will not be able to place new bids on listings or transfer money into their Prosper accounts.

This change does not affect borrowers residing in Pennsylvania, who remain free to create loan listings on Prosper."

Loanio touts platinum verification and co-borrowers

After nearly a year of anticipation, Loanio's launch appears imminent. In a email to potential users last week, Loanio announced, "In just a couple of weeks (yes, we mean it this time!), we will be done with the final touches and ready to roll out!"

Loanio CEO Michael Solomon has let us peek under the hood and we have some exclusive screen shots.

Loanio homepage


Borrow on Loanio - Unlike other p2p lending sites, Loanio allows partial funding. As seen on borrower page (below), "If enough bids equal 100% of your loan, it automatically gets originated. If the bids equal more than 35%, but less than 100% of your loan, you can accept less or try again."

Lending on Loanio - As seen below, lending on Loanio is similar to other p2p lending sites. At FINOVATE, Solomon told the audience, ""We believe that the use of co-borrowing and plantinum listings will provide a greater amount of security and confidence to lenders."

Co-borrow on Loanio - Borrowers have the option to add a co-borrower to their loan. Co-borrowers must have a credit score higher than the other borrower on the loan and must have at least a E credit grade.

Platinum verification - For a small fee, borrowers can improve their odds of funding through platinum verification. Platinum verified borrowers will have the following checked by Loanio - photo ID, income, bank account, employer, address, homeownership.

Loanio credit grades - To borrow on Loanio you must have a credit grade of E or higher. Loanio has established a credit grade system from A+ to F or no score (NC). An E credit grade is equivilant of Experian VantageScore 569-603. With a F or NC credit grade score you must have a co-borrower to use Loanio.

Fynanz improves borrower vetting

Fynanz made several improvements in the vetting process for new borrowers including the following changes:

• School certification is obtained directly from a borrower’s school (or a borrower has to provide a school transcript and tuition bill) to verify enrollment, class standing, and whether the borrower is enrolled half-time or full-time.
• All borrowers are required to provide valid bank account information prior to application approval. If this information is determined to be invalid, the application is rejected until it can be verified.
• In most cases, Fynanz contacts personal references provided by the borrower.

Some loans that were listed prior to these changes have been canceled prior to funding until borrowers can meet these requirements. In addition, there are fewer available loans as a result of these changes. The available loans, however, are of a higher quality and much more likely to complete the funding process.

Fynanz is the first peer to peer lending company to match most bids from family and friends. They are currently running a promotion where they will give some new lenders up to 5% of the amount loaned.

Fynanz, which just launched a few months ago, has received a lot of publicity due to the current student loan crisis. Today, for example, they were featured in the U.S. News & World Report.

10% off Lending Club fees

New borrowers can get 10% off Lending Club loan origination fees through an exclusive Credit Karma offer.


Borrowers on Lending Club are only charged as a result of an accepted and approved loan. Fees range from 0.75% to 3% depending on the borrower's credit grade. For example, if a C borrower requests $5,000 they will be charged a processing fee of 2% or $100. This borrower would save $10 by signing up through Credit Karma. The fee breakdown on Lending Club fees is:

• A - 0.75%
• B - 1.50%
• C - 2.00%
• D - 2.50%
• E - 2.75%
• F - 3.00%
• G - 3.00%
  

The total fee could range from $7.50 (a A-credit grade borrower approved for $1,000) to $750 (a G-credit grade borrower approved for $25,000). Based on these fees, 10% off might only save a borrower with good credit on a small loan less than a dollar. However, a borrower with poor credit requesting a large loan could save as much as $75 through this offer.

Credit Karma is a new company which offers free credit scores. Yes, it's really free. Not one of those tricks where you are suddenly charged monthly fees. I signed up last month. Credit Karma makes money if you sign up for one of the offers which will be presented to you. Credit Karma shows personalized offers, such as this Lending Club offer, based on your credit profile.

The downside for those concerned about privacy - you do have to provide your social security number in order for them to pull the necessary information. Credit Karma claims they "will never share your personal information."

In addition, there are several different types of credit scores - FICO, Experian PlusScore, VantageScore, and others. The score provided to me through Credit Karma was a TransUnion score, not my FICO score. TransUnion's scale is 150-950 unlike FICO which is 300 to 850. It appears Credit Karma may provide different scores to different customers.

I also found Zopa listed on Credit Karma but there were no special offers or coupon codes. Prosper was running banner ads but did not provide other deals.

Lending Club nominated as top innovator

Lending Club has been nominated as one of the Top 100 Internet innovators in the U.S. by the Industry Standard in the 'Commerce' category. Others nominated include Mint, Zillow, Farecast and Wesabe. The winner will be decided by popular vote and announced at the end of October.

Peer to peer lending companies have received many awards. Earlier this year, Prosper joined Amazon, Walmart, IBM, and others on Fast Company's 2008 list of the 50 most innovative companies. Prosper was also Time magazine's #1 website of the year in 2006 and one of the 50 best websites of 2007. At the 2008 Retail Banker International Forum, Zopa won the 'Most Threatening Non-bank Competitor.'

So, here's the question - if they win are they going to reuse the speech from their 2008 Webby?

Prosper eliminates defaults

In a site update today, Prosper eliminated all defaults - well, they renamed them. Defaults will now be known as "charge-offs". As reported on their blog:

"We are changing the way we display 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. We want to have transparency in the reporting of our marketplace’s default rate, and this change should help lenders take a more direct measure of the market’s charge-off rate. This change is the first step in a larger change we will be making in the way delinquent loans are displayed in lender portfolios."

In addition, Prosper will now allow some new lenders to make loans with PayPal and credit cards. Borrowers can invite family and friends to bid on their loan. After clicking on the link in the invitation, new lenders can place their first bid via PayPal or credit card. This is an attempt to make the site easier to use for new members.

Prosper Releases Market Survey Results

Prosper just released their monthly market survey for July 2008. For the first time, the survey includes statistics showing how borrowers who list and get funded in the Prosper marketplace indicate how they plan to use their personal loans. Also noteworthy, the percentage of prime borrowers (borrowers with 720+ credit scores) hit an all time high in July, accounting for 47% of funded loans.

July 2008 Funded Loans

• Personal Loan for Debt Consolidation - 43%
• Personal Loan for Business Use - 25%
• Personal Loan for Home Improvement - 7%
• Personal Loan for Education - 3% (Fynanz is trying to own this niche)
• Personal Loan for Auto/Vehicle - 3%
• Personal Loan for Other Use - 19%
  

Last year, soon after Lending Club launched, Lending Club released similar statistics showing their "smart" borrowers were requesting most loans for debt consolidation or to pay of higher credit card rates.