San Diego Housing Market News and Analysis

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Whoa, that's an interesting concept. I never knew such a thing existed. Admittedly I've spent 30 seconds looking at it so far, but I'll read up on it some more.

Yeah, I didn't know they had popped up either. But...

I suggest you understand the default rates, that site is less than a year old. Take a look at how manyof their loans made in Q1 of this year are 1-3 months late already.

Coming Defaults

What amount of the 10% that's late is going to go default is too much to tell. Honestly, I'd geuss at least half which puts a big dent in the earnings.

Only time will tell, but

The current overall default % is less than 1% and 0 for all credit ratings D and above.

Most of the loans are never funded because of the level of risk. You need to read each request and evaluate them individually. If you spread your risk over a large number of borrows, the risk/reward ratio looks reasonable to me. Just my opinion.

If the default rate grows, so will the interest rates to compensate.

Um, WOW. I only looked at it for a second and I'm pretty risk averse, but kind of reminds me of the opportunity to be the "house" in a friendly game of neighborhood blackjack. Good way to lose a lot of money quickly...

Some things are better left to casinos and real lenders (although the latter may be in trouble anyway).

I popped into the discussion forum, looks like the lenders are tittering over defaults, collection agency non-performance etc.

The company uses a rather bizarre habit of turning accounts 1 month past due over to the collection agency... Non-performance

I suspect the defaults will come in higher than the typical Credit Agency reported defaults. If the numbers come in much higher than traditional, say 20% (i.e 3.3% default rising to 4.0% default, you get a good dent to about 10% ROI.

With traditional default rate, the sweet spot appears to be tbe C credit group with a FICO in the 650-680 range. Default adjusted return is 11.50%. The others all drop below 10% when you head to the traditional upper default curve. BUT ... yeah big but, that's based on a debt to income ratio of less than 20%. These are unsecured loans, honor system documentation other than credit score...

I suspect you'll have significantly higher write-offs.

You add in the risk of underperforming account collection, fiduciary loss (Prosper.com goes under) or something else and I think you're looking at under 10% best case.

You've gotta ask yourself why, with all the E-Z credit flowing around the US like a flood of molasses, would any of these people need to go to an alternate source like that website for credit.

Just reading some of the requests really makes you wonder.

Like the guy who claims to have $1000 per month left (3000 income - 2000 expenses)with which to pay back a $5000 "debt consolidation" loan, why not just pay it back in 5 months?

Or the guy in the red shirt who wants money to pay back taxes? From the wording of his request, it sounds like he is asking for a gift, not a loan. Think about it, you're giving money to somebody who can't even pay their taxes?!?

This site is funny to browse though though, thanks for sharing!

I looked at the site a few weeks ago and decided it is just not worth it. Reading through the different reasons people want a loan is scary. With all the easy financing out there I can't even imagine why these borrowers would be going to this site for money. I can only assume that lenders have already denied them several times. I'm not going to be the one to assume that kind of risk. Also, the limited number of people using the site doesn't really make it easy to spread your risk. There aren't a lot of "good" loans that seem worthy of being funded. Isn't there some bit of wisdom that goes "neither a borrower nor lender be"?

"If you lend a friend money, you end up with neither the friend nor the money."

Why would you lend a stranger money?