I was just watching the evening news on CNN. Anderson Cooper was discussing the market with a few guests. The stock market is down nearly 40% on the year. He read a question from a viewer who asked if there was anything for someone to make money in a market like this.
The CNN "expert" suggested two things. First, if you have good credit and some cash it may be a good time to look into buying foreclosures. Second, look at p2p lending. People have few choices for loans right now and are looking to their peers. If you are in a position you can loan to others and earn a good return, according to the analysts.
This echos sentiment from a CNN article last week. With the market down, investors are looking to p2p lending for a better return. With traditional sources of credit disappearing, people are turning to p2p lending.
Back in March, Lending Club CEO Renaud Laplanche told The Kansas City Star the peer-to-peer lending industry is being aided by something of a perfect storm. "On the borrower side, banks are tightening the money supply," he said. "On the lender side, the stock market isn't performing well." If it was true in March, it is even more true now.
Thursday, October 9, 2008
Zopa closes shop in the US
I knew something was fishy at Zopa when last week they denied my loan request despite near-perfect credit. Was it a software glitch? Had they tightened lending standards without letting customers know?
After posting the rant about my loan denial, I received an email from customer service on Thursday night which indicated my loan may have been denied due to a software glitch. They said they would check on things and get back to me by Friday morning. By Tuesday I had not heard anything so I followed up with another email. I received this response:
"I'm told it should work now. When you have a chance, please go back to www.zopa.com and click "Borrow" (just like you did the first time). Just to be safe, we removed your information from the Zopa system. Therefore, you will start over as a brand new member."
Now, just a day later Zopa is shutting down loan operations. Here is part of the official announcement:
Update: Zopa's CFO posted the following message in their official forum:
"We obviously need to respond to this. The email from Affinity Plus is partially correct in that we are transferring our customers relationships to the credit union they either borrowed from or bought a CD from (invested in). We are NOT shutting the website today. As most of you know, Zopa's US operation has a very different model to that in the UK and Italy in that it works in partnership with financial institutions (the credit unions) rather than being a pure peer to peer marketplace as it is here and in Italy. So while our model is doing very well in current market conditions, the US has been adversely affected in a way that couldn't have been predicted when we launched and is no way the fault of our partners. For me, a real shame is that we weren't able to launch the original model over there for regulatory reasons, esp given what a great job the regulators have turned out to have been doing there over the last few years, but that is another story....
The decision has not been taken lightly, and has obviously been difficult for our US colleagues, but due to the current credit crisis we have decided to withdraw from the US marketplace. This decision will have no impact on Zopa's other activities in the UK, Italy and Asia. Zopa’s UK operation has experienced significant volume increases in 2008 with huge growth in new members and increasing lender returns, while continuing to maintain excellent credit quality – currently less than 0.5% of loans are affected by any kind of late payment issue, with actual losses below 0.04%. Zopa Italy has achieved the highest growth of any European peer-to-peer operation since its launch in January, and has recently launched the first secondary market for any peer-to-peer operation."
Tip: Wiseclerk, Prospers.org
After posting the rant about my loan denial, I received an email from customer service on Thursday night which indicated my loan may have been denied due to a software glitch. They said they would check on things and get back to me by Friday morning. By Tuesday I had not heard anything so I followed up with another email. I received this response:
"I'm told it should work now. When you have a chance, please go back to www.zopa.com and click "Borrow" (just like you did the first time). Just to be safe, we removed your information from the Zopa system. Therefore, you will start over as a brand new member."
Now, just a day later Zopa is shutting down loan operations. Here is part of the official announcement:
"You probably know that Zopa’s US operation has a very different model to that in the UK and Italy in that it works in partnership with financial institutions (the credit unions) rather than being a pure peer to peer marketplace as it is here and in Italy.
So while our model is doing very well in current market conditions, the US has been adversely affected as the credit unions have pretty much stopped lending which rather limits the work that our US friends can do. This just couldn’t have been predicted when we launched int he US and is no way the fault of our partners. For us, a real shame is that we weren’t able to launch the original model over there for regulatory reasons.
So, sadly, our US colleagues have decided to withdraw from the US marketplace. This decision will have no impact on Zopa’s other activities in the UK, Italy and Asia.
Zopa’s UK operation has experienced significant volume increases in 2008 with huge growth in new members and increasing lender returns, while continuing to maintain excellent credit quality – currently less than 0.5% of loans are affected by any kind of late payment issue, with actual losses below 0.04%.
Zopa Italy has also achieved the highest growth of any European peer-to-peer operation since its launch in January, and has recently launched the first secondary market for any peer-to-peer operation.
Zopa’s US customers’ deposit accounts continue to be insured by the NCUA up to $250,000, and servicing of those accounts as well as the loans will be assumed by the credit unions within 90 days."
Zopa is closing shop less than a year after they opened their doors.Update: Zopa's CFO posted the following message in their official forum:
"We obviously need to respond to this. The email from Affinity Plus is partially correct in that we are transferring our customers relationships to the credit union they either borrowed from or bought a CD from (invested in). We are NOT shutting the website today. As most of you know, Zopa's US operation has a very different model to that in the UK and Italy in that it works in partnership with financial institutions (the credit unions) rather than being a pure peer to peer marketplace as it is here and in Italy. So while our model is doing very well in current market conditions, the US has been adversely affected in a way that couldn't have been predicted when we launched and is no way the fault of our partners. For me, a real shame is that we weren't able to launch the original model over there for regulatory reasons, esp given what a great job the regulators have turned out to have been doing there over the last few years, but that is another story....
The decision has not been taken lightly, and has obviously been difficult for our US colleagues, but due to the current credit crisis we have decided to withdraw from the US marketplace. This decision will have no impact on Zopa's other activities in the UK, Italy and Asia. Zopa’s UK operation has experienced significant volume increases in 2008 with huge growth in new members and increasing lender returns, while continuing to maintain excellent credit quality – currently less than 0.5% of loans are affected by any kind of late payment issue, with actual losses below 0.04%. Zopa Italy has achieved the highest growth of any European peer-to-peer operation since its launch in January, and has recently launched the first secondary market for any peer-to-peer operation."
Tip: Wiseclerk, Prospers.org
Thursday, October 2, 2008
Need a p2p loan? Avoid Zopa
I have never considered the possibility I might be denied for a loan - yet it happened today. Only once in my life have I ever missed or been late on a payment (about four years ago I moved and the utility company didn't forward my last bill). I pay off my entire credit card balance every month. I have no debt except a home mortgage. My FICO score is over 700 and Prosper gives me a shiny AA rating.
On this blog I've largely neglected Zopa while writing much more about Prosper, Lending Club, Fynanz and Loanio. So, just for kicks I decided to go through the application process and write about obtaining a loan through Zopa. Imagine my suprise when I got this message.
"For Zopa to work, we can only arrange loans to folks with pretty good credit - a minimum FICO of 640, among other things."
What other things could they be talking about? According to the FAQ you need:
On this blog I've largely neglected Zopa while writing much more about Prosper, Lending Club, Fynanz and Loanio. So, just for kicks I decided to go through the application process and write about obtaining a loan through Zopa. Imagine my suprise when I got this message.
"For Zopa to work, we can only arrange loans to folks with pretty good credit - a minimum FICO of 640, among other things."
What other things could they be talking about? According to the FAQ you need:
- a minimum credit score (FICO) of 640
- income of $2,000 per month
- and a few years of credit history
Well, I have more than $2,000 per month income and I've got more than a decade of credit history. What else could they want? I found some more requirements on this splash page:
- Miniumum FICO score of 640
- Minimum of 3 years of credit history with at least 5 accounts
- No recent bankruptcies or serious delinquencies
- Stable gross income of at least $2,000/month
- Borrowers utilizing less than 60% of the credit available to them are more likely to be approved for a Zopa loan and at a lower interest rate
- A debt service ratio/debt to income of less than 50% of gross monthly income
Hmmm...no problems with any of these requirements. I sent a note to customer service requesting specific information about why I was declined. I received a vague response, "Since you do have a score above 640 it looks like the application was declined for one of the other reasons." I followed up with a phone call and was told the borrower requirements have changed within the last 30 days.
An email to their media contact was returned undelieverable.
Fearing identity theft or something worse, I logged in and pulled up my credit report. Only one surprise. There is a new item on my credit report - a credit inquiry today for a loan. The only inquiry on my credit report at all. Unlike Prosper and Lending Club, Zopa pulls a "hard" request when you inquire about a loan. I should have read all of the FAQ throughly before requesting a loan. Here's what Zopa has to say about their "hard" inquiry:
"We think it's best if you assume that there will be an impact to your credit score. That means you should only get a quote if you really would be interested in a Zopa Loan."
I would add - you should only request a quote if you have perfect credit and don't mind a hard inquiry on your credit score even if you decide not to obtain a loan through Zopa. Try one of the other p2p lending platforms (like Lending Club) which do not pull a hard inquiry.
Loanio: Day 1
Yesterday Loanio launched and there are already six loan requests. On the Loanio blog, CEO Michael Solomon says it has been a wonderful week for him despite the uncertain financial markets - his son turned one, he won $1,000 in the New York State lottery and finally launched Loanio. Loanio has released the following press release about their launch:
Loanio.com unveils its peer to peer lending platform today and offers subprime, thin and no credit borrowers, the opportunity to get loans without exposing higher risks to its lenders
NEW YORK, Oct. 1 /PRNewswire/ -- Loanio, Inc. launched its p2p lending website (https://www.loanio.com) today, addressing the needs of an underserved market--those with poor or no credit profile histories. Prior to the launch, borrowers with poor or no credit scores have been turned away from, or have had little luck, with other p2p lending platforms. Loanio is looking to change this.
Borrowers with poor or no credit scores will be permitted to participate on the p2p lending platform by using a Co-Borrower or guarantors. According to CEO and Founder Michael Solomon, "only around 10% of borrowers on p2p sites wind up getting a loan. Many of them have less than stellar credit profiles. With options for these borrowers drying up elsewhere, we believe this feature and others on the website will fill a sorely needed void in the p2p lending arena."
To provide lenders on the platform with more reliable data, the company also introduced "Platinum Verification Services." This service is optional and available to borrowers at the time they create their loan request. A Platinum loan will indicate to lenders that Loanio has verified certain, otherwise "self-reported", financial profiles of borrowers such as last year's filed tax returns, employment and income, and more. "We want to provide as much data to our lenders as possible and the verification of these items allow borrowers to tell lenders they are serious about this process. Lenders, in turn, will have the benefit of not having to wonder if the borrower may have given their income data a 'little extra padding.'"
While the Co-Borrower option is mandatory for those with bad or no credit, both the Co-Borrower and Platinum Verification features are available to all users as an option. Solomon says, "The idea is that we want to provide all borrowers with as many possible tools to shine and present appealing loan requests to the lenders." With these features available to all users, even a fair credit borrower may be seen as a better risk if they have a Co-Borrower with an excellent credit record attached to their loan. The combination will also help the borrower get even lower rates. "If you saw two loan requests for the same money and rates, but one had an excellent rated Co-Borrower attached to it and went through the Platinum Verification process, which one would you bet on? I think the choice would be clear" Solomon continues.
Loanio.com unveils its peer to peer lending platform today and offers subprime, thin and no credit borrowers, the opportunity to get loans without exposing higher risks to its lenders
NEW YORK, Oct. 1 /PRNewswire/ -- Loanio, Inc. launched its p2p lending website (https://www.loanio.com) today, addressing the needs of an underserved market--those with poor or no credit profile histories. Prior to the launch, borrowers with poor or no credit scores have been turned away from, or have had little luck, with other p2p lending platforms. Loanio is looking to change this.
Borrowers with poor or no credit scores will be permitted to participate on the p2p lending platform by using a Co-Borrower or guarantors. According to CEO and Founder Michael Solomon, "only around 10% of borrowers on p2p sites wind up getting a loan. Many of them have less than stellar credit profiles. With options for these borrowers drying up elsewhere, we believe this feature and others on the website will fill a sorely needed void in the p2p lending arena."
To provide lenders on the platform with more reliable data, the company also introduced "Platinum Verification Services." This service is optional and available to borrowers at the time they create their loan request. A Platinum loan will indicate to lenders that Loanio has verified certain, otherwise "self-reported", financial profiles of borrowers such as last year's filed tax returns, employment and income, and more. "We want to provide as much data to our lenders as possible and the verification of these items allow borrowers to tell lenders they are serious about this process. Lenders, in turn, will have the benefit of not having to wonder if the borrower may have given their income data a 'little extra padding.'"
While the Co-Borrower option is mandatory for those with bad or no credit, both the Co-Borrower and Platinum Verification features are available to all users as an option. Solomon says, "The idea is that we want to provide all borrowers with as many possible tools to shine and present appealing loan requests to the lenders." With these features available to all users, even a fair credit borrower may be seen as a better risk if they have a Co-Borrower with an excellent credit record attached to their loan. The combination will also help the borrower get even lower rates. "If you saw two loan requests for the same money and rates, but one had an excellent rated Co-Borrower attached to it and went through the Platinum Verification process, which one would you bet on? I think the choice would be clear" Solomon continues.
Wednesday, October 1, 2008
Loanio launches
I jumped the gun last week but it's for real this time. After nearly a year of anticipation, Loanio has finally opened their doors. You can sign up as a lender, borrower or co-borrower. Last month we got a sneak peak and reviewed Loanio. Now you can check it out at the official site.
There is currently one borrower listing. A borrower from Pennsylvania hopes to consolidate her credit card debt.
Thursday, September 25, 2008
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.
*****
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.
*****
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.
Wednesday, September 17, 2008
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
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:
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?
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?
Tuesday, September 16, 2008
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.
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."
Wednesday, September 10, 2008
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 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.
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