Someone from prosper.com read my blog!
Wow, that's when you know you've been blogging about one topic too much. Here is the quote in all it's glory:
Hi guys,
Andrew from Prosper here - there is definitely an opportunity for arbitrage on the marketplace, but you should realize that if you can't cover your losses because you've loaned your money to high-risk borrowers who default, it will be your credit score that gets smacked down (along with the high-risk borrowers' score, of course). And with a lower credit score, the arbitrage won't be quite as lucrative.
Anyway, it sounds like you guys understand the implications, but I wanted to make sure everyone reading this blog realizes it, too. (Cue NBC "The more you know..." shooting star...)
Andrew, thanks for checking out the blog, appreciate it. One question I have for you guys is this: are you going to be releasing data to lenders about the historical performance of your loans? Not only defaults and recoveries from default, but also some measure of prepayments like a CPR (link: http://www.cbtworldwide.com/glossary.htm#C)? I'd be really curious to know.
I contend that while defaults are important, prepayments can be just as important in terms of trying to figure out your expected duration/maturity of the loan as well as how much interest you should expect to make. You have a measure of default risk already, but currently no measure of prepayment risk (other than the Borrower telling you about it).
Cool, a great way to start the day.
Tags: personal finance prosper prosper.com
8:02 AM
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2 comments:
Those are some good questions. I'm interesting to see what they say.
Prosper looks to be a good deal for both the borrower and the lender. Try it.
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