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This is off topic of P2P loans, but I have mentioned a few times before the danger of the housing market crisis to your peer-to-peer loan portfolio so I will post this as information to people who are interested in debt markets or the current financial crisis.

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How the conversation occurred
My wife is Russian and we met because I lived in Russia for several years. We often have “Russian parties” where it seems that there are only Russian wives and the American husbands. Although I speak excellent Russian, I am often left to talk with the American husbands, so the ladies can gossip. Usually, I have little in common with the guys other than the Russian spouse so it can be a bit awkward at times. However, sometimes it can be interesting…

Why he started
Recently at one of these occasions, I met a man dating one of my wife’s friends who readily admitted to defaulting on over half a million dollars in mortgages to one of America’s largest banks. He explained that he had a small chain of stores that was running short of cash so he needed cash to fund the shortage. He also worked as a manager in a home construction business so he was familiar with real estate, appraisals, and mortgage financing.

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Since the main business was short on cash, he decided to buy an undervalued house and refinance it at above market value to bring in some cash. (The properties he purchased were undervalued on paper only and not based upon actual condition.) He pulled a list of low value for sale properties Read the rest of this entry »

I made a quick video demonstrating how to purchase loans on the Lending Club secondary market with FolioFN. In is very easy to purchase these — It only took a few minutes to purchase. There are a few things to keep in mind when purchasing Lending Club loans via FolioFN:

• You must meet certain income and net worth requirements
• It is not available in every state
• Even if your state does not allow you to directly buy loans through the primary market, you can likely participate in the secondary market.
• You pay no fees as a buyer — the seller pays a 1% fee
• You can resell the loan on FolioFN when you wish (less a 1% fee)

An additional item that I should have demonstrated in the video is Read the rest of this entry »

When signing up for FolioFN to buy and sell Lending Club notes (loans) on the secondary market, there is a series of questions that you must answer to be eligible. You must give your social security number, Income, Liquid Net worth, and Net Worth. It is now somewhat like a hedge fund where you must meet certain requirements to participate in the market. Although, the requirements at FolioFN are lower than those of a hedge fund. According to the FAQ, “the current State and Financial Suitability conditions” (the income and net worth requirements) are:

individual lenders who are residents of states other than California must (a) have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000. Individual lenders who are California residents must (a) have an annual gross income of at least $100,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $100,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000.

The prospectus for the Lending Club secondary market can be found on Lending Club’s website.

I have signed up and I am working on a video to show you how easy it is to purchase loans on the secondary market. I’ll post the video when it is available.

Below is the text of the forms that you must go through to become trader in the secondary market.
Read the rest of this entry »

I was expecting Prosper’s Quiet Period to go similar to Lending Club’s — Quiet for a few months and then come back out better than ever. Therefore, I am amazed at what I just read…

Prosper Receives a Cease and Desist Order from the SEC

Considering that Prosper was already in a quiet period and no longer talking bids on loans, this seems like an unnecessary step by the SEC, but they may have felt it was necessary to make a point. I also wonder if they had not received complaints because of their misleading marketing — including quotes in the media on horribly misleading default statistics. Or maybe it was their complete failure in collections as Prosper continued to focus on origination and not on operations.

I have transferred out all the money in my account possible and am glad that I stopped lending with Prosper some time ago.

Quotes from the Cease and Desist Letter
There were some interesting points to the cease and desist letter that I would like to highlight (any emphasis added is mine).
Read the rest of this entry »

Prosper Marketplace has just announced that their affiliate program has shut down and has requested that sites “take down any reference to Prosper immediately.” It seems ridiculous to remove all references to Prosper especially since this would take a long time to remove all mentions of Prosper in a P2P lending blog. However, I will remove the advertisements that are currently being displayed here offering the Prosper account sign up bonus.

It does not surprise me that the closure of the Prosper referral program follows the announcement of the Prosper quiet period. This is the same pattern that Lending Club followed — except Lending Club announced the quiet period at the exact same time they closed the referral program. I hope that Lending Club’s referral program returns soon now that they have exited their quiet period and returned to P2P lending.

Here is the note from Prosper announcing the end of the referral program that I received tonight: Read the rest of this entry »

Prosper announced that they are entering a quiet period and will not be accepting new commitments from lenders. This follows on Lending Club’s announcement yesterday that it is coming out of their quiet period. It seems Prosper is interested in having the same form of loans that can be resold which Lending Club announced yesterday.

Update: Prosper Received a Cease and Desist Order from the SEC.

Overall, both announcements are likely to be a good thing for the P2P lending marketplace. Although, with the current credit crunch and market downturn, Prosper’s timing is not ideal. Many people will be seeking alternative forms of credit and investments over the coming months.

Prosper mentions that they will work to ensure that borrowers can still receive funding so that the platform does not completely dry up during the registration process, but it looks like that funding is not secure yet.

Didn’t a Prosper manager boast around the time of the Lending Club quiet period announcement that the registration could be done without a quiet period if it was done correctly?

The note from Prosper Marketplace about the quiet period: Read the rest of this entry »

I planned to blog in commiseration with Tom about being denied for a loan. Tom was denied for a Zopa loan and I was rejected for a GE Money Bank credit card through Amazon. GE Money Bank took 10 days to tell me that they could not verify my identity despite the promise on Amazon.com of a 30 second approval process. I have a 800 credit score and provided all information including a phone number and they could not verify my identity. They did not bother calling to verify and customer service told me the process is computer automated. Ten days for a computer program to return results? I doubt it…

Sorry /Rant Off
I’ll skip the remainder of my planned rant about Amazon’s relationship with GE Money Bank Read the rest of this entry »

Prosper Marketplace’s recent fee changes on P2P loans are further separating P2P lenders’ interests from those of Prosper. Prosper is loading up more fees at the front of the loan so they will be earning a far greater percentage of their income from loan origination. Lenders, on the other hand, earn all their money from loan payments being made. There has long been concern that Prosper creates and packages loans and moves on to originate the next loan while forgetting about collections. Collection (or even loan fraud) becomes someone else’s problem, but unfortunately the lenders are not allowed to attempt collection leaving them with no recourse other than complaining via the internet.

The fee changes detailed in the Prosper September newsletter: Read the rest of this entry »

Loanio has continued to claim be almost available since I started blogging on P2P lending. Loanio in fact has been promising its imminent release since before I started blogging P2P lending — back in November of 2008.

For about the past year (maybe more), Loanio has been requesting you to sign up for their email announcements to stay informed of their launch. It is likely that Lending Clubs SEC troubles have impacted Loanio and caused a delay, but why do they keep announcing they will be launching soon? Launch and then announce if you don’t know when you are launching.

Loanio has announced their own launch via email and announced the Read the rest of this entry »

I regularly receive scam emails requesting large loans through my contact form on this loan related website. Most of these are probably some type of advanced fee fraud if you were to start corresponding with the individual.

There are some people who take pride and joy in wasting scammers time by corresponding with them, but I don’t have time for that. Although it is humorous to read through some of the tales of scam-baiting at 419eater.com.

I hope other people are not falling for these loan scams, but unfortunately they are. There are various types of financial fraud on the internet — here are some examples of people who were charged. Of course, there is also the famous Prosper case of Jessica Wolcott.

The best email that I received had the subject line “Seeking a loan for $350,000″ and the email body text of “need funding.” That is all the email contained.

Here is one below that claims to be from Atlanta Georgia, but if you look up his IP address he is somewhere in the Caribbean.

I am a small company in Atlanta GA which with need to join together the sum
of $100.000 to pay the emission of bonds private and public which will be
sold in the whole world by NEW YORK Stock Exchange stockbrokers I also have
several sources of international investors who will buy the bonds of my
company when it are emitted and published out of purse. Since year 2000
that I fight to succeed. I have to accomplish several voyages to find
partners who now will help me to carry out my macro commercial project and
industrialist who is at 100% innovating and reliable like says it to me
economists. I wish that you to help itself to find funds to pay the
emission of the bonds for my company by the means of my lawyers located at
Miami FL. Of course I will give you more information to make a enquette
before engaging you with me. I am French and does not speak quite English
but takes lessons to learn.