Its been a topic of conversation among blogs and message boards: are there any institutional lenders using Prosper? Is it even allowed?

Well, the answer is yes, they are allowed and as of now, they are being promoted. Prosper allows asset managers, hedge funds, and other institutions the opportunity to use peer-to-peer lending. To some this may take away some of the steam of people lending to people, but the reality is that for the Prosper marketplace to survive long term, there needs to be more volume.

An interesting aspect of this is that institutions can leverage Prosper's openness of data to create their own lending models and fund loans accordingly. It's not known if there are any such institutions which have already become lenders but it would be interesting to see if these kinds of lenders can actually be attracted.