Prosper Expands P2P Loans Marketplace in Response to Credit Crisis

State of California Paves Way for America’s Largest Peer-to-Peer Loans Marketplace to Resume Lending Activity With Expanded Vision and Model, More Online Investing Options

SAN FRANCISCO--(EON: Enhanced Online News)--Prosper, the online destination for borrowing money and investing in personal loans, today announced that it has resumed lending activity following a six-month quiet period and significantly expanded the peer-to-peer (P2P) lending model it pioneered. Prosper’s expanded model includes its new Open Market initiative specifically aimed at unfreezing consumer credit by opening Prosper to financial institutions and providing more online investing options for lenders.

“The Prosper Open Market initiative will help fill the void left by the collapse in asset-backed securitization”

The California Department of Corporations, recognizing the urgent need to get consumer and small business credit flowing, accelerated the process of granting regulatory approval to Prosper so that it could reopen immediately. Prosper had ceased all lending activity on Prosper Loans Marketplace and has been in a quiet period since October 2008 while it registered for approval with the Securities & Exchange Commission. That process has not yet been completed and is still ongoing. As such, Prosper is open to borrowers nationwide, but for the time being only residents of California and institutional investors whose primary place of business is in California can take advantage of the alternative investment opportunity Prosper loans provide. Likewise, only California lending companies can list loans on the Prosper Open Market.

Preston DuFauchard, the Commissioner of the California Department of Corporations, said, “New ideas and approaches are needed to increase access to consumer and small business credit, especially in today’s environment. Prosper’s P2P and Open Market lending models are perfect examples of the kinds of innovative ideas that can help get credit in the hands of people who need it while instilling in our financial markets desperately needed openness and transparency. We’re proud to take the lead in providing regulatory approval and oversight for Prosper.”

“Prosper was founded on the vision of creating the world’s most open, transparent and durable market for personal loans,” said Chris Larsen, co-founder and chief executive officer of Prosper. “Building on that vision, we believe our core P2P model and new Open Market initiative can play a role in helping to get credit flowing again. Prosper offers an alternative to government bailouts by empowering ordinary Americans to invest and take part in helping rebuild our economy from the ground up. While California regulators have taken the lead in embracing our model to the benefit of borrowers everywhere, we look forward to extending the Prosper marketplace to investors across the country as well.”

Prosper Opens Platform to Financial Institutions

In response to the credit crisis, Prosper has opened up its platform to financial institutions through its new Open Market initiative. Open Market listings are existing loans made or owned by lending companies offered for sale on Prosper. Open Market is a fundamentally new lending model that gives financial institutions a way to obtain much needed capital to be able to extend credit to more people, while providing individuals and institutional investors with an opportunity to invest in rebuilding the U.S. economy based on any number of social and financial objectives. Because Prosper loans have a one-to-one relationship between the investment and the underlying asset, they’re inherently transparent and less complex than traditional debt securitization and other traditional bank lending methods.

A wide range of lending companies can benefit from selling loans on the Prosper Loans Marketplace, from banks and credit unions to specialty lenders who focus on serving specific consumer segments or types of loans. Prosper is initially working with a small number of lending companies that have been carefully vetted and registered with Prosper. Once approved, the companies will begin listing loans for Prosper lender members to bid on. All Open Market loans will be clearly marked and will include information about the company that originated the loan. In addition, all Open Market listings must be current and have at least three months of payment history. More companies and loans will be added over time as more lending companies successfully complete Prosper’s approval and registration process.

For Prosper lender members, Open Market gives them an opportunity to invest in professionally underwritten, pre-funded loans based on a range of financial and social objectives, such as investing in personal loans for cars manufactured in a particular community to help support that community’s economy.

“The Prosper Open Market initiative will help fill the void left by the collapse in asset-backed securitization,” said Raj Date, a Prosper Board Member, and the Chairman & Executive Director of the Cambridge Winter Center for Financial Institutions Policy. “During the credit bubble, U.S. banks and finance companies had grown addicted to securitization – but securitization was a victim of its own complexity. Securitization structures were just too arcane, too opaque, and too dependent on rating agency judgments. The Open Market initiative avoids those pitfalls, by extending Prosper's traditional philosophy of open and transparent lending markets. I think it is a game-changer.”

Trading Platform Adds Liquidity

Prosper first introduced the concept of people-to-people lending when it launched in 2006. The goal was to create a platform where people could invest in each other in a way that was socially and financially rewarding. The concept quickly caught on: from the time it launched up to the time it entered a quiet period in October 2008, Prosper had grown to more than 800,000 members and approximately $180 million in personal loans had been funded through the marketplace.

Prosper’s newly developed Trading Platform, pending regulatory approval, will be the only auction-based trading platform in the P2P lending industry, and will give Prosper lenders the ability to sell Prosper loans (called “Notes”) to other lenders on the same platform. Known in financial circles as a “secondary market,” the development of the trading platform is an important step forward for P2P lending because it will bring additional liquidity, which will make Prosper a more active, vibrant market for money and online investing.

Having a trading platform will give Prosper lenders the ability to sell a loan if they need access to the funds before the full loan is paid off. It will also provide Prosper lenders with more investing options by giving them an opportunity to bid on loans they missed out on when the loans were first listed, or to invest in loans with durations that meet their specific investing objectives.

Improved Risk Rating System

Prosper has also added additional layers of safety and vigilance to the marketplace with an improved credit grading system for loans listed on Prosper with the introduction of Prosper Ratings, and by requiring that loan listings by individuals meet the new minimum credit score requirement of 640. Prosper Ratings are based on historical loan performance data and are designed to better convey risk. While the estimated loss rate and estimated returns have been shown at the point of bidding since October 2007, the Prosper Rating letter grade as well as the estimated loss rate will be shown in the listing along with a narrower credit score range and other extended credit data.

About Prosper

Prosper Marketplace CA, Inc., is a leading online destination for borrowing money and investing in loans. It pioneered direct peer-to-peer and Open Market loans, which allow people to invest in each other in a way that is socially and financially rewarding. Additionally, Prosper’s auction model provides an open and transparent way to borrow or invest in consumer loans on terms that are favorable to everyone involved in the transaction. More than 800,000 people from across the country are part of the Prosper peer-to-peer lending community. Since launching in February 2006, approximately $180 million in loans have been funded in the marketplace.

Prosper was co-founded by Chris Larsen, co-founder of E-LOAN. Backed by Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital, and Omidyar Network, Prosper has raised approximately $40 million in venture capital.

Forward-Looking Statements:

This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements may include, among other things expected rates of return and interest rates; the availability of the trading platform; the anticipated success and attractiveness of Prosper's lending platform; and the benefits of Prosper's lending platform as compared to other existing alternatives in the marketplace. Although Prosper believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. For example, Prosper may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Prosper has included important factors in the cautionary statements included in the prospectus, which is available only to California residents, particularly in the "Risk Factors" section, that could cause actual results or events to differ materially from forward-looking statements. Prosper does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF THE SECURITIES TO BE OFFERED ON PROSPER’S PLATFORM.