Prosper Releases Market Survey Results for August 2008

SAN FRANCISCO--(BUSINESS WIRE)--Prosper, America’s largest people-to-people lending marketplace, today released results for August 2008. Prosper CEO and Co-Founder, Chris Larsen, discusses the impact of the pervasive credit crunch on the Prosper marketplace.

Prosper’s People-to-People Lending Market Survey results are released the second Tuesday of every month. To register to automatically receive the survey, send an email with “SUBSCRIBE” in the subject line to: p2plendingmarketsurvey@prosper.com.

Market Commentary By Prosper Co-founder and Chief Executive Officer, Chris Larsen

When we first introduced the monthly market survey one year ago, we noted that the impact of the credit crunch on the Prosper marketplace was broadly constructive. At that time we noted that as consumers began experiencing the evaporation of introductory credit card rate offers and home equity loan options, Prosper was becoming an increasingly attractive financing alternative, especially for borrowers with good and excellent credit. We also discussed that lenders on Prosper were steering their bids toward the listings of higher credit quality borrowers.

As may be gleaned from the “Mix of Funded Borrowers” table below, the trends we observed at this time last year remain in full force today, particularly as the pervasiveness of the credit crunch is extended even further in the wake of the Federal government’s bailout of mortgage giants Freddie Mac and Fannie Mae.

Mix of Funded Borrowers
		August 2008			August 2007			August 2006			Year-to-Date 2008			Year-to-Date 2007			Year-to-Date 2006			Since Inception
Prime		43	%		32	%		25	%		43	%		29	%		27	%		35	%
Near Prime		49	%		59	%		50	%		52	%		57	%		49	%		54	%
Sub Prime		7	%		9	%		25	%		5	%		14	%		24	%		11	%

The table above also indicates that as lenders on Prosper have become more conservative in their bidding strategies and can be more selective as more prime (720+ credit scores) and near prime (600 - 719 credit scores) borrowers turn to Prosper, sub prime (520 – 599 credit scores) borrowers listing on Prosper may need to leverage “social capital,” such as inviting friends and family to bid to fund a portion – if not the majority – of their requested loan amount, in order to improve their chances of getting funded.

Very broadly, friends and family bidding activity demonstrates to lenders in the marketplace that borrowers are bringing more to the table than their credit data; they’re bringing people who are willing to put their money on the line because of their belief in that individual’s integrity and ability to repay the loan. In this tough economic climate, Americans’ social capital may be more important than ever.

August 2008 Prosper People-to-People Lending Market Survey
Membership and Loan Volume Statistics
		August 2008		August 2007		Year-to-Date 2008		Year-to-Date 2007		Since Inception
New Members		20,756		30,623		259,283		270,866		797,411
Funded Loans ($)		$6.1 million		$6.6 million		$60.9 million		$56.4 million		$169.9 million
Funded Loans (Units)		1,202		979		9,986		8,110		27,371
Average Loan Size		$5,052		$6,717		$6,099		$6,954		$6,208
Daily Average Number of Borrower Listings		2,120		2,577		2,395		2,203		1,759

Purpose of Personal Loan Listings and Fundings

Borrowers who post listings in the Prosper marketplace are asked how they intend to use their personal loan. The following reflects borrowers’ statements of intended use of loan proceeds with regard to both listings and loans. Prosper does not verify or confirm after funding how loan proceeds are used.

		August 2008 Listings		August 2008 Funded Loans
Personal Loan for Debt Consolidation		50%		44%
Personal Loan for Business Use		22%		22%
Personal Loan for Home Improvement		6%		8%
Personal Loan for Education		6%		6%
Personal Loan for Auto / Vehicle		3%		3%
Personal Loan for Other Use		13%		17%

Estimated Annual Return on Prosper Select Index
		August 2008
Prosper Select Index		6.94%
Prime Select Index		7.75%
Near Prime Select Index		6.16%
Sub Prime Select Index		7.64%

Average Borrower Rates on Prosper Select Loans
		August 2008		July 2008		August 2007		Year-to-Date 2008		Year-to-Date 2007		Since Inception
Prime Select Loans		10.00%		10.06%		10.11%		9.84%		10.03%		9.96%
Near Prime Select Loans		18.07%		16.44%		16.94%		16.33%		15.93%		16.23%
Sub Prime Select Loans		n/a		n/a		24.56%		27.36%		23.27%		24.21%

Definitions

Since Inception: November 1, 2005 through August 31, 2008. Prosper’s by invitation only “friends and family” launch began on November 1, 2005 and Prosper launched to the general public on February 13, 2006.

2008 Year-to-Date: January 1, 2008 through August 31, 2008.

2007 Year-to-Date: January 1, 2007 through August 31, 2007.

2006 Year-to-Date: January 1, 2006 through August 31, 2006.

Prosper Select Index: The Prosper Select Index return is the estimated average annual return on principal, based on actual delinquency performance to date. The Prosper Select Index includes AA - E credit grade loans for borrowers whose credit reports at the time of application indicated zero current delinquencies, three or fewer credit inquiries, and a debt-to-income ratio of 40 percent or less. The annual return period reflects loans originated in the twelve month period ending one month prior to the observation date of August 31, 2008. Prime Select includes AA and A credit grade loans (credit scores of 720+). Near Prime Select includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime Select includes E credit grade loans (credit scores between 560 and 599).

Average Borrower Rates: Average Borrower Rates are the weighted average borrower rates on Prosper Select Index loans with loan amounts between $5,000 and $10,000. Rates shown are interest rates, not annual percentage rates.

Mix of Funded Borrowers: Prime includes all AA and A credit grade loans (credit scores of 720+). Near Prime includes all B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes all E and HR credit grade loans (credit scores below 600).

N/A: Not available; no loans met these criteria.

About Prosper

Prosper, America's largest people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone. Prosper’s membership consists of over 800,000 people from across the country. Since launching in February 2006, over $170 million in loans have been funded in the marketplace.

The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper's online auction platform. People who want to borrow on Prosper create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. People who register as Prosper lenders set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. In addition to criteria commonly used by institutional lenders, such as credit data and histories, Prosper lenders can consider borrowers' personal stories, endorsements from friends, and group affiliations. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan to the borrower. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrowers and lenders.

Prosper was co-founded by Chris Larsen, co-founder of E-LOAN, and John Witchel, technology entrepreneur. Backed by Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital, and Omidyar Network, Prosper has raised approximately $40 million. Prosper's marketplace platform is patent pending.