Doing a bit more research into ROI (return on investment) I've discovered that, on average, the ROI of loans has increased in the past year as opposed to last year by about 2% for credit grades of D or above.

Now 2% may not seem like a lot of money, but when you take 2% of 75 million dollars in loans, its 1.5m dollars. That's not an exact calculation, but it's serves as an example of a small percentage making a big difference in overall dollar amounts.

What accounts for this? Lenders are getting smarter and developing better techniques to choose better loans to invest in. This is good news, and its being shared in the community.

But the other side of the coin is that the ROI of high risk loans is going down, significantly. I would imagine lenders are seeing the high interest rates as a potential gold mine and are taking more and more risks on these types of loans. It's not really working out in a global view, though. Many good quality loans are not being funded because of lenders chasing high returns. I'd suggest that the community would benefit more by funding less risky loans and would also benefit if Prosper would put something in place to make these loans less risky.

Is it time to bar anyone with too many DQ's from getting a loan altogether? Of the 594 loans originated in 2007 with over 5 DQ's, 118 have defaulted, an astonishing 20% default rate.

I'm not suggesting abandoning high risk loans, I have a number of them myself. But something could be done to protect the community as a whole from itself.