House of Cards?

OPINION PIECE… Caution is advised as these are my own thoughts and observations!

Lately I’ve been thinking about Lending Club and wishing it were back up and running. Since my start with the LC back in November I have had four loans pay off and one default (I believe it was doomed from the start, but took the risk anyway, so I don’t have any bad feelings about that loan) out of 174 loans. That’s a default rate of 5.75% which is very respectable vs. Prosper.com’s track record (Google ‘bamalucky’ as he has been a good tracker of this sort of information as has ‘Fred93′). Currently, and wisely perhaps, I am withdrawaling money from Prosper.com almost daily as I don’t believe Prosper is doing enough to stop the rising tide of delinquent loans. I now have 14 loans in immediate danger of train-wrecking out of 201 active loans. This is unacceptable under any economic time or financial ‘crisis’ juncture. So my hope this evening as I write this is that Lending Club, with all the great revisions to the site on the lender side, will be reborn soon. My portfolio with them is doing well and actually is above my estimated forecast as I was expecting at least 4 defaults this far into it and instead have been greeted with 4 paid off loans. Once Lending Club does come back from the ‘dead’ I will be lending there again and putting money into new loans to show my support. In the meantime, I will be continuing the pullout at Prosper.com and placing the money into savings (which is earning 3x what Prosper.com is per LendingStats.com and 5x what EricsCC.com is quoting for my account).

Disappointment abounds from a lender perspective when it comes to Prosper as they have failed in so many correctable ways whether it be in collections or even just honest communications with people. They have placed a large wall between themselves and the people they are supposed to be serving and that, frankly, sucks. I’ve found the opposite to be true with Lending Club (even with the ‘quiet period’) when it comes to collections and service. Why is it so hard for people to understand within companies that if you don’t build a strong level of service as your foundation the whole thing will topple over from weakness in the knees? Prosper.com is a troubling company in that they keep adding more bricks to their wall and aren’t as open as they were in 2006 when the whole show started. This is regretful as I would never have signed up for this crazy ride knowing what I know now about the people involved inside the wall. So two questions for people this evening… If you had to throw a dart on the wall to guess Lending Club’s return, what date would it be? Second question… If you had to do the same thing with Prosper.com’s demise, what date would you choose? Seriously, I don’t see Prosper surviving in this dreadful state of delinquency or absolutely outrageous level of service. By the way, my wife was badgered by ‘customer service’ before the loan went through and this left a level of dung in my mouth that is unbelieveable in taste. The bitch actually was so horrible she made her cry at work as she was in disbelief! Considering all we had done to help build this rotten empire. So I challenge Prosper to apologize, fire the bitch who has the mouth on her, get collections roped up and back in order and get some hairy balls in it’s crotch in this P2P business or find themselves looking down the double-barrel of competition that will crush them by being proficient in important areas they are neglecting. I’m tired of being nice to Prosper.com as they haven’t done much to instill confidence in their methods lately. Anyone else feel this way?

My guess-timate for Lending Club’s return… September 15th, 2008

My guess-timate for Prosper.com’s demise under current conditions… March 23, 2009

Post your thoughts in the comments!

My hope is that Pierre Omyidar and other VC’s will reconsider any further funding of Prosper.com until the house of cards is reshuffled and made of stone (or at least stronger stuff) as lending institutions should be. Prosper.com is heading down the same slippery lending slope as Countrywide and IndyMac. I wish the SEC would step in on this one and investigate negligence where fiduciary responsibility is concerned. At least Lending Club is working to get SEC’s full blessing on their endeavor and knocking over obstacles that could very well railroad Prosper without the other debacles on their plate. I’m also reconsidering my stance on the lawsuit against Prosper.com… I may actually put my name on the list based on the way things are deteriorating.

PS- Doug Fuller NEVER got back to me on the security hole which could easily result in a very successful phishing scheme being set up by not having verification active within the internal system as well with messaging and flagging… Dumb, dumb, dumb!