Monday, May 01, 2006

Prosper repurchases loans from lenders

Hmm...interesting post by Jon Witchel (or some other Jon employed by Prosper), Prosper's CTO, on forums, which officially confirms that has purchased a late loan from lenders. Based on private comments from other lenders, the purchase was made not only at par, but also w/accrued interest added on.

Obviously, it is in Prosper's pre-IPO/competing for mindshare interests to do so, though I wonder what factors are necessary for bailout on a given late loan. Perhaps they're accepting implied responsibility for the early, gold-rush days of Prosper lending, when vetting and internal confirmations weren't quite as good?

More comments later, but obvious economicky thoughts that come to mind are moral hazard, moral hazard, moral hazard :)

However, I can attest to the fact that not all late loans have been repurchased.

Original link on forums here

At least they plan to leave the loan status within groups unchanged -- so in other words, defaulting loans in Group X will still show up under Group X's loan grid -- the only difference is that the lenders will (presumably) be consolidated into one lender, Prosper.

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