Hello Friends! Thanks so much for stopping by and visiting my blog Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.
One of the things I have been doing on this blog has been outlining some of my other investments that I have been making besides my 'trading account'. One of these has been my Prosper.com account. This "person-to-person" lending account has been described here first on February 10, 2008, when I related how my nephew Ryan introduced me to this website and most recently on July 13, 2008.
I had been contributing $50/month and a few of you may also have been inspired by my activity to also invest in Prosper.
In February I had 44 loans totaling $2,323.55 and by my las Update #5 in July, 2008, I was up to 96 loans totaling $5,964.23. (I had made additional transfers of funds into Prosper in addition to the regular deposits.)
Unfortunately, things are in a state of limbo for Prosper and for those of us who have been participating on this website. While existing loans continue to be serviced and payments credited to Prosper lenders, new funds and new loans are now suspended until Prosper.com meets SEC requirements and conforms to appropriate regulations.
Since I am no longer able to re-invest my funds into new loans, I have chosen to let my loan repayments collect waiting for the process to restart (?). As of January 28, 2009, my Prosper.com statistics are as follows:
Cash Balance: $945.61
Value of loans: $5,412.08
Payments in transit: $27.69
Total Account Value: $6,385.39
In regards to existing loans, I currently have 106 active loans. Of these, 93 are current, 3 are less than 1 month late, 4 are 1 month late, 2 are 2 months late, 2 are 3 months late and 2 are 4+ months late.
Prosper has been active writing off the 4+ months late loans. Currently I have received Net Income (interest + fees + awards): $607.95.
Net charge-offs: $(482.33)
Net gain/loss: $125.63.
The value of all of the loans is $5,412.08 with $1,964.91 of payments received. The average interest rate on remaining loans is 14.13% and the daily interest accrual is $2.07.
There has been little recent "news" regarding the status of Prosper.com. A summary of this event is well described on this "the Next web.com" entry by Zee. Zee also included the PDF of the actual SEC statement. Zee explains:
"It seems the shutdown is based on the amount of reliance both the lender and borrower have on the site. Since the lender does not know who the borrower it leaves the lender vulnerable and unable “to pursue his or her rights as a noteholder” if the borrower fails to meet the agreed payment terms. In addition, the document states that for the loan agreement to continue it would require Prosper.com to still exist and operate which in this climate, is no guarantee."
Another explanation of events at Prosper is found on the Inc. Website entry where Jason Del Rey explains:
"In November, the SEC filed a cease-and-desist order against San Francisco-based Prosper Marketplace, which runs Prosper.com, ruling that the loan notes being offered on the site were securities and needed to be registered with the commission. Prosper had stopped facilitating new loans the previous month in anticipation of the ruling, and to start the registration process to set up a secondary marketplace where lenders could package and sell loans to each other. Prosper also reached a $1 million settlement with the North American Securities Administrators Association, the membership organization for state securities commissioners. As a result, another peer-to-peer startup, New York-based Loanio, decided to do the same in November, only a month after launching. London-based Zopa.com also closed its U.S. peer-to-peer lending site in October."
Currently the only active person-to-person site in the United States is Lending Club. As Del Rey relates:
"As of the end of the year, San-Francisco based Lending Club was the only one left standing. The company first started talking to the SEC in October 2007 about setting up a secondary market for lenders who, in search of liquidity, wanted to package and sell their loan notes to other lenders, according to Renaud Laplanche, Lending Club's founder and CEO. After SEC staff members started hinting that Lending Club should register its loan notes for the primary market as well, the company decided in April to stop facilitating new loans and enter the registration process. It cost Lending Club several million dollars, but the company was able to restart its operations in October."
Additional explanations have been blogged by TreeHugger, by Erick Schonfeld on TechCrunch, and even the Daily Kos got into the action with an entry by bink.
Prosper has little to say itself. They simply report on their website:
"Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.
Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you're an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you'll be able to track and monitor your loans; and you'll be able to withdraw funds from your Prosper account.
If you're a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you're a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources. As the appropriate securities authorities may consider a new loan listing to constitute the offer of a security, we are unable to post new loan listings on our site until our registration statement becomes effective.
A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we're required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective."
As for me, I shall continue to 'hang in there' with my nominal funds waiting to see what happens with Prosper. I suspect that if Lending Club can figure this out, then Chris Larsen the CEO and Co-Founder of Prosper as well as a co-founder of E-Loan should be the one to figure this out.
Meanwhile, I shall continue to report to you on intervals on the progress or lack thereof of this alternative investment which for me and for my nephew seemed so promising.
Yours in investing,
Bob