Watch Your Back Lending Club, Prosper is Back, at least in California

It felt like Prosper was in a quiet period longer than George Bush was in office, but the P2P lending site is now back online. I've invested with both Prosper and Lending Club, so I'm excited to continue my trial of both services to determine which is better.

The relaunch brings about some changes for Prosper. Most notably, the site has a new service that will help financial institutions take loans they've already made and resell them to Prosper investors.

Wait a minute... that kind of sounds like they're trying to sell US their toxic assets. Hopefully they're also offering up high-quality loans where personal lenders can get a piece of the action.

According to the Wall Street Journal, Prosper investors benefit with potentially higher interest rates on loans that have already been vetted by a financial institution, are current and have at least three months of payments that have already been made.

Still, risks are inevitable when you're lending to who knows who, regardless of their credit score (uh, speaking of that risk, an "A" rating loan that I had going on Prosper for a while just went late 4 of My Loans on Prosper are now Late (not counting the one that already defaulted) -- 3 of those 4 Loans are "A" rated and one is "B" rated -- they were fine before Prosper relaunched - wonder if they hadn't been updating defaults in their quiet period. Starting to think P2P lending is a bad idea!)

According to the WSJ, the average lender return since the company's inception in 2006 is 2.8%, after defaults. But since March 2007, when the company starting providing more information about borrowers' credit and employment histories, average lender returns have improved to 4.8%.

Since Prosper's Securities and Exchange Commission registration process is still going on, it is operating under an intra-state exemption from the California Department of Corporations. That means that, for now, only California residents and businesses will be able to lend or invest in Prosper loans, although borrowers nationwide can apply for a loan. Once the company completes its registration process, other financial institutions and lenders in other states will follow, says Chris Larsen, Prosper's chief executive.

Haven't read anything yet about that ridiculous $100k networth (beyond your home price) to be a lender, like the rules over at Lending Club. I wonder if Prosper has added that in the fine print. I'll let you know if I find out anything more.