Grab the most prominent member of the news media you can find with one hand (gently, of course), and the highest-ranking Prosper employee you can find with the other (ditto), sit them down in front of a computer, and invite the Prosper employee to demonstrate how one can arrive at the ROI estimates shown on Prosper's home page ("Earn 8.74% to 12.10% returns") using Prosper's own marketplace performance page, which is cited as the source of the data.
The parameters, as stated in the footnote on the home page, are:
Rates of return shown are the average annual returns on Prosper loans[I formatted the text to make the criteria easier to read, but made no other changes.]
originated between 7/1/06 and 11/30/07
to borrowers with AA - C credit grades
who requested automatic funding,
have 0 - 1 current delinquencies
and 0 inquiries in the last 6 months on their credit record,
as of 1/17/08.
When I entered these parameters on Prosper's marketplace performance page yesterday, I got:
AA - 5.42%
A - 5.61%
B - 6.17%
C - 11.27%
which is a far cry from "8.74% to 12.10% returns".
Oh, one more thing. You might mention that the total dollar amount of the 399 loans which meet the specified criteria is $2,959,672, or just over 3% of the loans generated by Prosper during that time period.
(Just a few days ago, the estimated lender ROI range on Prosper's home page was even higher: "9.49 - 12.81%". The footnote for that version says that it was based on loans meeting the same credit and automatic funding criteria, but with origination dates of 7/1/06 through 10/30/07 and an observation date of 11/30/07. I couldn't replicate those ROI numbers using the marketplace performance page either.)
For background reading:
MNH Report #6
The related thread on Prospers.org
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