Prosper takes a huge move forward with a secondary market
Prosper announced this morning that they will be creating a $500M secondary marketplace for the person-to-person loans they manage. This will enable lenders to resell loans they have on their books to other investors to free up capital.
Currently, when you lend money on Prosper, it is lent directly to a person, unlike Zopa which uses "risk buckets". That lent money is then locked up for the entire term of every three year loan Prosper does. This move will enable lenders to act even more like a bank by enabling them to free up capital by selling off old loans.
Currently, many banks (and CU’s) originate mortgages, generate the mortgage fee and sell the loan off to another investor. Banks and CU’s also can sell participations to one another in which on FI would own 40% of a loan and the other 60%. But the two FI’s involved in the participation could sell chunks of their investment to each other or other investors if additional capital was needed.
This is a huge step for p2p lending and should attract many more participants into the arena.
This really legitimizes the P2P model (which, in theory, seems hardly distinguishable from the CU model).