Harmoney

[BJ1]

Still no reports coming through. Have noticed these two loans recently. I'm not sure how these levels of repayment are manageable and I'm sure I wouldn't want an autolend setting to have placed them in my portfolio.

[icyfire]

Still no reports coming through. Have noticed these two loans recently. I'm not sure how these levels of repayment are manageable and I'm sure I wouldn't want an autolend setting to have placed them in my portfolio.
The debt-to-income ratio on the first loan is 24.3% which is pretty high IMO.
The second loan is even worse at 25% which makes one wonder how on earth it's an A4
Hopefully Harmoney's new system will do a better job.

[777]

The debt-to-income ratio on the first loan is 24.3% which is pretty high IMO.
The second loan is even worse at 25% which makes one wonder how on earth it's an A4
Hopefully Harmoney's new system will do a better job.

A4 because he owns his house without a mortgage.

Low income as over 60 and probably not working but getting the pension plus investment income or part time work.

Actually I see he has been with his employer for 21 years so is still working.

[icyfire]

A4 because he owns his house without a mortgage.
That would have been helpful if he/she used the house as security. I doubt the borrower would sell the house to pay off the loan if lost their job or retired.
Paying off a 77K loan at a very high repayment rate over the next 5 years makes this loan a high risk and low reward.

[IntheRearWithTheGear]

But if you doubt the loan rating - would that not mean you doubt all loan ratings ?

Harmoney have access to more data than we do (one would hope) - they have a better picture to classify
the loan - i would say we cant beat that with less information.

Perhaps sombody who owns their own house would count higher plus the fact that may have
had other loans in the past etc - which show good behavours. Maybe being married ups the score.

If harmony get it wrong - im out $25.00

We dont see past loan history :drool: but can guess at it - i guess thats the magic sauce which makes it all work.

[777]

That would have been helpful if he/she used the house as security. I doubt the borrower would sell the house to pay off the loan if lost their job or retired.
Paying off a 77K loan at a very high repayment rate over the next 5 years makes this loan a high risk and low reward.

Owning his house without a mortgage would indicate he has a repayment history which is what would give him points.

[icyfire]

But if you doubt the loan rating - would that not mean you doubt all loan ratings ?
I certainly don't have blind faith in Harmoney's loan ratings. However, I don't doubt all loan ratings, just the ones that look questionable.

[Darchie]

How about he was an only child & was gifted the house!

[BJ1]

I posted the first two and this one because the first two tenets of lending are the willingness and ability to repay, not security (which we don't have) or asset values. After this one, no more. BUT, I won't be surprised if Harmoney cops more flack if these become quite normal.

[icyfire]

I posted the first two and this one because the first two tenets of lending are the willingness and ability to repay, not security (which we don't have) or asset values. After this one, no more. BUT, I won't be surprised if Harmoney cops more flack if these become quite normal.
It just doesn't make any logical sense to me. Why would they borrow 49K at 18.5% when they could have gone to the bank and got a mortgage at 5%?
And the income-to-debt ratio on this loan is 34% which is crazy high.

[BJ1]

Given their ages and their income sources a bank would probably consider that their future income potential is always going to be benefit based - super will replace whatever they are on now. That makes the ability to repay equation unacceptable for a bank. I'd bet that they've been declined by banks which is why they are with Harmoney. So, potentially, unacceptable risk at standard bank mortgage rates but acceptable for Heartland Bank through Harmoney? The difference being that standard bank lending considers loans as individual transactions and Harmoney's bulk funders consider the pool of their investment.

[Darchie]

I posted the first two and this one because the first two tenets of lending are the willingness and ability to repay, not security (which we don't have) or asset values. After this one, no more. BUT, I won't be surprised if Harmoney cops more flack if these become quite normal.

But look at the fee!!!! Or is the whole listing riddled with errors!

[icyfire]

But look at the fee!!!! Or is the whole listing riddled with errors!
Yes, the borrower fee is $4,700 which is massive. Something is fishy!

[777]

Yes, the borrower fee is $4,700 which is massive. Something is fishy!


Look at the previous loans that were posted on previous page.

[XxOrooxX]

Anyone been with harmoney for 3-5 years yet? would be interested to see how many loan actually reach maturity. Whats your RAR? Any1 making above 15%? (only those that have been with harmoney over 3yrs)

[Cool Bear]

Anyone been with harmoney for 3-5 years yet? would be interested to see how many loan actually reach maturity. Whats your RAR? Any1 making above 15%? (only those that have been with harmoney over 3yrs)
Harmoney only started in Aug 2014. So will be very few here who hits 3 years. Will be an incredible achievement to have an RAR of 15+% after 3 years!

[IntheRearWithTheGear]

Harmoney only started in Aug 2014. So will be very few here who hits 3 years. Will be an incredible achievement to have an RAR of 15+% after 3 years!

Jan 28, 2015 13.11% rar and roughly 60-80k over the period.

[Joshwnz]

My first deposit was October 2014, my RAR is currently 17.47%. I have been depositing steadily over that period, probably more heavily over the last 15-18 months (hence the high RAR today).

[joker]

Given their ages and their income sources a bank would probably consider that their future income potential is always going to be benefit based - super will replace whatever they are on now. That makes the ability to repay equation unacceptable for a bank. I'd bet that they've been declined by banks which is why they are with Harmoney. So, potentially, unacceptable risk at standard bank mortgage rates but acceptable for Heartland Bank through Harmoney? The difference being that standard bank lending considers loans as individual transactions and Harmoney's bulk funders consider the pool of their investment. Borrower fee so large must be as a result of payment protection. How's this for a scenario...borrower has terminal illness and life insurance as well as payment protection now. Want's last big OE with partner comfortable that repayment is fully covered in the not to distant future?

[BJ1]

On their incomes I'd hate to be paying life premiums for meaningful cover - and Payment Protect protects the borrower, not the lender.

[joker]

On their incomes I'd hate to be paying life premiums for meaningful cover - and Payment Protect protects the borrower, not the lender.

Yes.. Payment Protect pays off covered outstanding payments...so the lender gets his money back. That protects the lender.

[Cool Bear]

My first deposit was October 2014, my RAR is currently 17.47%. I have been depositing steadily over that period, probably more heavily over the last 15-18 months (hence the high RAR today).
wow! 17.47 is very high after so many months invested. Well done!

[myles]

Harmoney more than halves annual loss as revenue climbs 63% (https://www.nbr.co.nz/article/harmoney-more-halves-annual-loss-revenue-climbs-63-b-205951)

[joker]

Oh my. Payment protect is a form of repayment insurance for the borrower. The lender benefits from the possibility of earning a premium on loans with Payment Protect but if any repayments are waived, this leads to a loss of (some) principal for the borrower.

"Looking closer, the investor return on Payment Protect is the net of:

+ Payment Protect fee
+ Interest on the fee
– Fees paid
– Repayments waived
= Net Return from Payment Protect

https://www.harmoney.co.nz/payment-protect/lenders

Thanks for the info - that's amazing. Could you post the actual $$$ value effect of Payment Protect on the loan attached if no payments were ever made? Thanks9049

[myles]

Thanks for the info - that's amazing. Could you post the actual $$$ value effect of Payment Protect on the loan attached if no payments were ever made?
The answer your asking for is $0 I think i.e. the Lender will loose all $'s invested.

The below from Harmoney might clarify how it works:

What is the unfunded amount on Payment Protect loans?

The unfunded amount is the difference between the loan amount owned by a borrower and the amount funded by lenders. Take for example a $11,000 loan that includes $1,000 Payment Protect Fee. The unfunded amount on this loan is $11,000 - $10,350 = $650. The lender only funds $10,350 ($10,000 paid to the borrower on settlement + $350 Payment Lender Protect Fees paid to Harmoney) of a total loan amount of $11,000.

In summary:
The borrower receives $10,000 to keep! (thank you very much suckers)
Harmoney receive $350 as $200 sales commission + $150 management fee
The lender lends $10,350 to pay for the above.

If no payments are ever made the $150 management fee should be paid back (pro rata rebate at 100%), however I believe the lender would likely receive $0 as Harmoney would likely claim any pro rata rebate of the management fee for managing the default. Not sure on this one, either way the most the lender would get back is the $150 management fee...

The key is that there isn't actually $11,000 in real money in the example above, only $10,350 (the $650 is on paper only). However, the benefit to the lender is the additional interest gained from the non existent $650 i.e. calculated on the total $11,000 - if the loan doesn't default.

I think I have the above correct - I've not had one of these as yet - if anyone has, does the above look right?

Added: In your loan above the management fee is (15% of $6,975 Payment Protect) $1,046.45, so the lender might get some of that back?

[RMJH]

The answer your asking for is $0 I think i.e. the Lender will loose all $'s invested.

The below from Harmoney might clarify how it works:

What is the unfunded amount on Payment Protect loans?

The unfunded amount is the difference between the loan amount owned by a borrower and the amount funded by lenders. Take for example a $11,000 loan that includes $1,000 Payment Protect Fee. The unfunded amount on this loan is $11,000 - $10,350 = $650. The lender only funds $10,350 ($10,000 paid to the borrower on settlement + $350 Payment Lender Protect Fees paid to Harmoney) of a total loan amount of $11,000.

In summary:
The borrower receives $10,000 to keep! (thank you very much suckers)
Harmoney receive $350 as $200 sales commission + $150 management fee
The lender lends $10,350 to pay for the above.

If no payments are ever made the $150 management fee should be paid back (pro rata rebate at 100%), however I believe the lender would likely receive $0 as Harmoney would likely claim any pro rata rebate of the management fee for managing the default. Not sure on this one, either way the most the lender would get back is the $150 management fee...

The key is that there isn't actually $11,000 in real money in the example above, only $10,350 (the $650 is on paper only). However, the benefit to the lender is the additional interest gained from the non existent $650 i.e. calculated on the total $11,000 - if the loan doesn't default.

I think I have the above correct - I've not had one of these as yet - if anyone has, does the above look right?
Hmm, not sure, and I have a few PP loans! I thought the payment protect fee came to lenders with principal repayments together with interest thereon.

[IntheRearWithTheGear]

Im unsure with pp loans but i will add this to dicussion. There seems to a difference between amount lent and
amount got back - one would expect it to equal ? Perhaps someone more enlightened can explain ? cheers and thanks.

I understand pp is not an insurance for the lender. But perhaps somehow we are disadvantaged by early payback of a loan ?

9051

[myles]

Hmm, not sure, and I have a few PP loans! I thought the payment protect fee came to lenders with principal repayments together with interest thereon.
But this is for a Charged-Off loan with no repayments, so no principle repayments in this case.

[BJ1]

I think it's simple guys. The borrower pretends to pay the lender a fee as a top up of income to be earned if the loan is fully repaid, but if the borrower successfully invokes payment protect the lender may receive none of the PP fee which was merely an additional obligation under the loan (and thus really is the last amount to be repaid when a loan goes full term). Assessing the risk of a borrower not repaying requires the lender to try to understand why the borrower wants to pay extra for PP. Apart from life and trauma cover, how many people will pay for something they don't think will ever be useful? It seems to me that PP borrowers are highlighting their potential for eventual inability to repay. Time may tell if the default experience on PP loans exceeds that on non PP loans.

[Soolaimon]

It seems to me that PP borrowers are highlighting their potential for eventual inability to repay.

Exactly....... That is why I stopped taking them months ago.

[RMJH]

RAR is not showing on my dashboard, just two blank spaces. Is this just me?!

[CageyB]

Same, since yesterday.

[myles]

RAR back just now for me. Still no Export reports :(

[myles]

Today is the day for the change to rates etc (3rd August), not changed yet.

I wonder if the server might have to go down and up for the change over?

[CageyB]

I wouldn't be surprised if there are few, if any, loans available for a couple of days while they switch over.

[777]

RAR back just now for me. Still no Export reports :(


Just requested and received an export report.

[myles]

I guess things didn't go as planned - new loans are still coming through at the old rates...

[Cool Bear]

I guess things didn't go as planned - new loans are still coming through at the old rates...
Harmoney did say that there will be a transition period as loans approved under the old scheme will still be at the old rates. I supposed those applicants may be put into a different grade if they chose to reapply. So, most may not bother?

[Investor]

Harmoney made an announcement confirming that they will release scorecard 1.5 in the next week or so.

[whitt]

Scorecard 1.5 and defaults:

Looking at the actual platform stats i have quickly looked at each grade
https://www.harmoney.co.nz/investors/marketplace-statistics?_ga=2.169745889.1758441852.1501981831-2062486148.1475453833

then i have worked out charge offs vs total issued and got the following data as the fairly represent actual figures.

EG
A Grade from stats link above
chargeoff $621,621
Total Issued $120,703,450
621621/120703450=0.51%

A=0.51%
B=0.73%
C=2.15%
D=4.9%
E=9.2%
F=15.4%

These actual platform stats differ from the estimated default rates on website
https://www.harmoney.co.nz/investors/investment-risks

It should also be noted that the new scorecard 1.5 F grades only have a upper estimated default rate of 9.50%.

In summary to me it appears Harmoney used actual stats to refine new scorecard 1.5 grades. This has given us a heap of new grades at lower end and looks like they are going to ditch the higher risk borrowers at other end.

Hopefully they reset the marketplace stats also as the new scorecard will unfairly manipulate the stats data as the old vs new grades are not compatible. A new grade C1 is effectively comparable to an old grade B2.

[myles]

These actual platform stats differ from the estimated default rates on website

The statement at the bottom of the fist linked graph might explain that:

Charged Off amounts shown in the table are total lifetime Charge Offs to-date. They cannot be directly compared to the annual forecast default rate here as they are not annual Charge-Off amounts. Results may vary.

I think there is another element that needs to be considered here also - these values are weighted on dollar value, which may not correlate to number of unique loans i.e. more smaller loans may default - what I'm trying to saying is that the ratio of defaulted dollars to total dollars may not be the same as number of defaulted loans to total number of loans.

Probably similar, but there could be some variances.

[Investor]

Yes as myles has pointed out you have calculated the default rate using actual figures which are from the inception of Harmoney, not a 12 month period.

[whitt]

cheers.
hopefully they reset the stats data anyway with new scorecard

[joker]

Does anybody out there keep stats on rewritten loan charge-off rates? I was wondering if rewrite loans are a greater or lesser risk than first time loans (given that most of the time only a few payments have been made before rewriting for a higher amount). I'm concerned that rewrites might be borrowers just digging themselves deeper into debt.

[Cool Bear]

Does anybody out there keep stats on rewritten loan charge-off rates? I was wondering if rewrite loans are a greater or lesser risk than first time loans (given that most of the time only a few payments have been made before rewriting for a higher amount). I'm concerned that rewrites might be borrowers just digging themselves deeper into debt.
I don't. And as the transaction reports from Harmoney does not have the info, it will be rather tedious to come up with proper stats. One can go through one's defaults and see which ones are rewrites but that does not means much unless you know how many rewrites are in your total population of loans.

[leesal]

Hi,

I'm new on Harmoney, and looks like I've missed some opportunities, given the difference between scorecard 1.0 and 1.5. Anyway I price risk for a living so thought this would be somewhat interesting.

Following on from Whitt's post, and appreciate that charge off stats and defaults are on a different basis. Nonetheless, it would be useful the reconcile the stats. Which is my query, are we able to accurately relate the stats to each other, in order to see how each grade is tracking against their budget.

Pulling off an example of grade A:



issued
Current
Full Pd
Arrears
Charge Off
Difference


A
120,703,405
54,155,061
53,807,450
1,944,987
621,621
10,174,286



First of all: There is a difference of 10k in the stats. My initial thought was these were loans that were repaid early, however surely these would be categorised under "Full Pd".

2: The 120m of loan issued, would be spread across the 33 months since inception, and would be a mix of 3 and 5 year loans. If we assume these are evenly distributed and that the loans are all 4 years. The average loan would be 16 months through, therefore having a further 32 months to run. If I take the hazard rates, which are only currently 29 months through (and ignore the that am applying the stats to a distribution rather then the mean), after 16 months 70% of the loses would have eventuated.

Therefore I take the 0.5% and stretch it out over the term, which gives a 0.73% default, lets call it 0.8% (taking a mean rather then distribution would skew hazard rates up, so feel a figure in the 60s for hazard is more appropriate)

Therefore charge off rates of 0.2% per year, against a forecast of 0.16%

Any problems with this working? Other then the "difference", I guess there is also debt which is beyond terms, which could be brought into the calculatioln.

Cheers

[myles]

First of all: There is a difference of 10k in the stats. My initial thought was these were loans that were repaid early, however surely these would be categorised under "Full Pd".
This could be due to Cancelled loans maybe i.e. Loans issued, but borrower doesn't go ahead with the loan?

[Cool Bear]

Hi,


Pulling off an example of grade A:



issued
Current
Full Pd
Arrears
Charge Off
Difference


A
120,703,405
54,155,061
53,807,450
1,944,987
621,621
10,174,286



First of all: There is a difference of 10k in the stats. My initial thought was these were loans that were repaid early, however surely these would be categorised under "Full Pd".


Cheers

I think that the 10m is the principal that has been paid for loans that are marked current. So they do not fit into the "fully paid" category.

[myles]

I think that the 10m is the principal that has been paid for loans that are marked current. So they do not fit into the "fully paid" category.
Yes, this! That actually tells a bit of a story about loan lifespan i.e. paid out early.

[scottwalshnz]

Looks like scorecard 1.5 goes into effect midnight tonight...

[leesal]

I think that the 10m is the principal that has been paid for loans that are marked current. So they do not fit into the "fully paid" category.
Thanks, that's helpful :). So then I get something like this:



Year

Period

All Loans

% Grade A

A taken out

quarters

% through

early repay

full paid

loan

princ paid

current

hazard %

charged %

charge



2014

3

9

23.8%

2.14

12

0.75

75%

1.61

0.54

0.35

0.18

100%

0.9%

0.02



2014

4

9

23.8%

2.14

11

0.6875

75%

1.61

0.54

0.31

0.22

100%

0.9%

0.02



2015

1

22

23.8%

5.24

10

0.625

75%

3.93

1.31

0.66

0.64

100%

0.9%

0.05



2015

2

36

23.8%

8.57

9

0.5625

75%

6.43

2.14

0.94

1.20

100%

0.9%

0.08



2015

3

42

23.8%

10.00

8

0.5

75%

7.50

2.50

0.94

1.56

100%

0.9%

0.09



2015

4

60

23.8%

14.28

7

0.4375

66%

9.37

4.91

1.54

3.37

95%

0.9%

0.12



2016

1

40

23.8%

9.52

6

0.375

56%

5.36

4.17

1.07

3.09

88%

0.8%

0.07



2016

2

47

23.8%

11.19

5

0.3125

47%

5.24

5.94

1.22

4.72

71%

0.6%

0.07



2016

3

48

23.8%

11.42

4

0.25

38%

4.28

7.14

1.12

6.02

56%

0.5%

0.06



2016

4

69

23.8%

16.42

3

0.1875

28%

4.62

11.80

1.31

10.49

34%

0.3%

0.05



2017

1

51

23.8%

12.14

2

0.125

19%

2.28

9.86

0.69

9.17

12%

0.1%

0.01



2017

2

73

23.8%

17.37

1

0.0625

9%

1.63

15.75

0.52

15.22

1%

0.0%

0.00





506


120.428




53.84006


10.687

55.90079



0.640




As a disclaimer, its possible to model with a different set of assumptions and arrive at the same result. Nonetheless on this set it would suggest Grade A has performed to

Default rate of 0.225% per year
Early repayment rate of 75% spread evenly over 1st two years (ie 37.5% would early repay after one year of loan).

That would indicate a very high rate of early repayment! Am surprised it would be that high.

[Cool Bear]

Thanks, that's helpful :). So then I get something like this:



Year
Period
All Loans
% Grade A
A taken out
quarters
% through
early repay
full paid
loan
princ paid
current
hazard %
charged %
charge


2014
3
9
23.8%
2.14
12
0.75
75%
1.61
0.54
0.35
0.18
100%
0.9%
0.02


2014
4
9
23.8%
2.14
11
0.6875
75%
1.61
0.54
0.31
0.22
100%
0.9%
0.02


2015
1
22
23.8%
5.24
10
0.625
75%
3.93
1.31
0.66
0.64
100%
0.9%
0.05


2015
2
36
23.8%
8.57
9
0.5625
75%
6.43
2.14
0.94
1.20
100%
0.9%
0.08


2015
3
42
23.8%
10.00
8
0.5
75%
7.50
2.50
0.94
1.56
100%
0.9%
0.09


2015
4
60
23.8%
14.28
7
0.4375
66%
9.37
4.91
1.54
3.37
95%
0.9%
0.12


2016
1
40
23.8%
9.52
6
0.375
56%
5.36
4.17
1.07
3.09
88%
0.8%
0.07


2016
2
47
23.8%
11.19
5
0.3125
47%
5.24
5.94
1.22
4.72
71%
0.6%
0.07


2016
3
48
23.8%
11.42
4
0.25
38%
4.28
7.14
1.12
6.02
56%
0.5%
0.06


2016
4
69
23.8%
16.42
3
0.1875
28%
4.62
11.80
1.31
10.49
34%
0.3%
0.05


2017
1
51
23.8%
12.14
2
0.125
19%
2.28
9.86
0.69
9.17
12%
0.1%
0.01


2017
2
73
23.8%
17.37
1
0.0625
9%
1.63
15.75
0.52
15.22
1%
0.0%
0.00




506

120.428



53.84006

10.687
55.90079


0.640



As a disclaimer, its possible to model with a different set of assumptions and arrive at the same result. Nonetheless on this set it would suggest Grade A has performed to

Default rate of 0.225% per year
Early repayment rate of 75% spread evenly over 1st two years (ie 37.5% would early repay after one year of loan).

That would indicate a very high rate of early repayment! Am surprised it would be that high.

Good modeling!

75% early repayment for 2014 and 2015 is not high considering it is now 2017! "A" grade loans also have a much higher early repayment than other grades. I shall share my analysis of my 3726 loans taken between June 2015 to December 2016 (18 months). Results as at 1 July 2017

current$/ paid$/ default$/
grade # of loans invested$ invested$ invested$ Total
% % % %
a 547 27.1% 72.9% 0.0% 100.00%
b 832 31.1% 67.6% 1.2% 100.00%
c 741 36.6% 62.1% 1.2% 100.00%
d 790 40.9% 55.8% 3.3% 100.00%
e 501 33.7% 54.2% 12.0% 100.00%
f 315 32.6% 53.1% 14.3% 100.00%

total 3726 34.3% 62.2% 3.4% 100.00%

results as at 1st July 2017 for all loans invested from Jun 2015 to 31/12/2016

note: %ages are based on actual $ value of loans not number of loans. The number of loans is just for information to give an idea of the population size

.

[Cool Bear]

a 547 27.1% 72.9% 0.0% 100.00%
b 832 31.1% 67.6% 1.2% 100.00%
c 741 36.6% 62.1% 1.2% 100.00%
d 790 40.9% 55.8% 3.3% 100.00%
e 501 33.7% 54.2% 12.0% 100.00%
f 315 32.6% 53.1% 14.3% 100.00%

total 3726 34.3% 62.2% 3.4% 100.00%

.
Tried to align the numbers but it turn to custard when I post.
The columns are
grade
number of loans
% $current/$invested
% $principal paid/$invested
% $writeoffs/$invested
% Total

[Bjauck]

I see that there is a C5 loan offered this morning at the new "scorecard 1.5" (lower) interest rate (19.49% pa) but with the old estimated default rate (1.51% pa)

Simple error or a big cut in expected return for investors in that loan?

[CageyB]

Wow, I got an auto-lend order today even though my ratio of funds available:invested was very low (<1%). That's an interesting change as I haven't had one in about 2 months.

[Cool Bear]

Wow, I got an auto-lend order today even though my ratio of funds available:invested was very low (<1%). That's an interesting change as I haven't had one in about 2 months.
Probably because you have very little competition as many would not have reinstated their auto lend yet.

[myles]

Anyone else seeing negative Funds Available lately?

9084

This is the second time I've seen it in the last week or so. Seems to be a bit of a glitch as I can't see how it could happen?
Might have to monitor $ in vs $ out a bit closer for a while to see what's happening...

[leesal]

Good modeling!

75% early repayment for 2014 and 2015 is not high considering it is now 2017! "A" grade loans also have a much higher early repayment than other grades. I shall share my analysis of my 3726 loans taken between June 2015 to December 2016 (18 months). Results as at 1 July 2017

current$/ paid$/ default$/
grade # of loans invested$ invested$ invested$ Total
% % % %
a 547 27.1% 72.9% 0.0% 100.00%
b 832 31.1% 67.6% 1.2% 100.00%
c 741 36.6% 62.1% 1.2% 100.00%
d 790 40.9% 55.8% 3.3% 100.00%
e 501 33.7% 54.2% 12.0% 100.00%
f 315 32.6% 53.1% 14.3% 100.00%

total 3726 34.3% 62.2% 3.4% 100.00%

results as at 1st July 2017 for all loans invested from Jun 2015 to 31/12/2016

note: %ages are based on actual $ value of loans not number of loans. The number of loans is just for information to give an idea of the population size

.

So thats quite a lot more then, if your stats only include Jul15 to Dec16! If I strip out A grade in those months my model gives 72.9m loans , 36.6m fully paid (50%) and 0.4m charged (0.5%); Quite a considerable % short of your 72.9%.

It would also depend on the distribution of the data, whether most of your loans were taken in 2015. However its suggesting that nearly all borrowers early repay, either to refinance or minimise debt. Which makes sense from Harmoney's profitability, that they maximise loan writing.

So back to the forecasting drawing board for me!
-------------

Another area I am struggling to reconcile, is the Arrears against performance by grade:

For example under grade A performance by credit grade:

Arrears are stated as 1.944m
Current is 54.155m
Total outstanding = 56.1m

The ageing shows 97.59 current (so 2.4% aged in arrears)

Multiply 2.4% in arrears by 56.1m = 1.346m

Or an unexplained difference of 0.6m (which could be interest)

--------------

Moreover, you would only expect a small portion of the debt would be falling in any given period.
Grade A:
56m is current
1.2m approx is falling in the month (plus interest) [using average loan length 48 months]

If most of the arrears is falling in 1-30 days over, (1.16 of 2.4% or 48%)... That suggests 0.9m of grade A debt in arrears, which logically cannot make sense (unless 50%+ of grade A payments are dishonoring)

Not sure where am going wrong here :(

[icyfire]

Anyone else seeing negative Funds Available lately?

9084

This is the second time I've seen it in the last week or so. Seems to be a bit of a glitch as I can't see how it could happen?
Might have to monitor $ in vs $ out a bit closer for a while to see what's happening...
Harmoney needs to show the Transaction History in real time (Money In, Money Out, Date, Transaction type).
I spotted the negative Funds Available a few times myself several months ago.

[Cool Bear]

So thats quite a lot more then, if your stats only include Jul15 to Dec16! If I strip out A grade in those months my model gives 72.9m loans , 36.6m fully paid (50%) and 0.4m charged (0.5%); Quite a considerable % short of your 72.9%.


My 72.9% includes the principal portion of current loans that had been paid. So, your equivalent figure is 43.57m or about 60%.

[Cool Bear]

Anyone else seeing negative Funds Available lately?

9084

This is the second time I've seen it in the last week or so. Seems to be a bit of a glitch as I can't see how it could happen?
Might have to monitor $ in vs $ out a bit closer for a while to see what's happening...

I get that in the past when my cash balance is close to zero. But the negative balances right themselves very quickly. All due to timing differences. I used to reconcile their figures to mine to the last $ but nowadays I do not as it is too time consuming. So long as it is within a reasonable amount, it is fine with me.

[winner69]

Did you see Heartland have lent $78m though Harmoney over last year

Yiou think they (and the other instos) get first dibs and you fight over the leftovers

Hardly true Peer to Peer is it

[Soolaimon]

Lots of loans coming thru now but they are filling quite quickly. Could be result of backup after new rates or the new rates are proving attractive?

[alistar_mid]

Did you see Heartland have lent $78m though Harmoney over last year

Yiou think they (and the other instos) get first dibs and you fight over the leftovers

Hardly true Peer to Peer is it

?

I deployed $100k in 2 $50k chunks, each time it took maybe 4-5 weeks, logging in a couple of times a day + auto lend.

It wasn't that hard.

So what if Heartland has $78m, it had no effect whatsoever on my ability to lend.

[myles]

Yiou think they (and the other instos) get first dibs and you fight over the leftovers
No, they don't. With retail running well above the platform average and Wholesale running below, I think it is the other way around?


Hardly true Peer to Peer is it
Yes it is. Even with a few BIG peers...

[BJ1]

P2P = peer to peer = person to person = individual with money to lend lending to individual needing money? Not a bank in the middle.

[myles]

P2P = peer to peer = person to person = individual with money to lend lending to individual needing money? Not a bank in the middle.

peer to peer != person to person

The retail side of Harmoney, which is what we invest in, IS, in general, peer to peer. In the context of the post I replied to...

Though if you consider that some of the Borrowers represent Businesses, then are they really peers?

[Bjauck]

peer to peer != person to person

The retail side of Harmoney, which is what we invest in, IS, in general, peer to peer. In the context of the post I replied to...

Though if you consider that some of the Borrowers represent Businesses, then are they really peers?

Maybe on the platform, perhaps investors who are companies should be restricted to lending to borrowers who are companies?

I think it is a stretch to say that Heartland Bank as an investor on the Harmoney platform is a peer of the many borrowers in whom it invests.

Heartland itself has depositors and it is they who would be the peers to the Harmoney borrowers. Heartland itself "clips the ticket" on the funds that pass from its depositors to the borrowers on the Harmoney platform.

It could even be said that Harmoney is discouraging smaller peers on the investing side by charging higher lender fees for those with under $50,000 invested through the platform.

I am not sure what definition of "peer" is appropriate in this context but this is what I think it normally means:
Definition of "peer" a person (http://dictionary.cambridge.org/dictionary/english/person) who is the same age (http://dictionary.cambridge.org/dictionary/english/age) or has the same social (http://dictionary.cambridge.org/dictionary/english/social) position (http://dictionary.cambridge.org/dictionary/english/position) or the same abilities (http://dictionary.cambridge.org/dictionary/english/ability) as other people (http://dictionary.cambridge.org/dictionary/english/people) in a group (http://dictionary.cambridge.org/dictionary/english/group)
http://dictionary.cambridge.org/dictionary/english/peer

Disc: I have shares in HBL.

[myles]

5 Months in ($100K added, no withdrawals):

Total Loans: 1,216
Overall Avg: $92.17
Paid Off: 50 (4.1%)
Arrears:
1-30 10 (0.82%)
31-60 7 (0.58%)
61-90 1 (0.08%)
91-120 0

Total Value increase (after tax and fees): $5,139.74

9096
XIRR value is after tax and fees.
ADXIRR = XIRR less total value of arrears 31-60 days or above.

9097
RAR still rising but slowing.

Returning $53.49 per day.

With compounding at current rates, expected values:
$226,208.90 in 5 years
$486,690.05 in 10 years

[joker]

5 Months in ($100K added, no withdrawals):

Total Loans: 1,216
Overall Avg: $92.17
Paid Off: 50 (4.1%)
Arrears:
1-30 10 (0.82%)
31-60 7 (0.58%)
61-90 1 (0.08%)
91-120 0

Total Value increase (after tax and fees): $5,139.74

9096
XIRR value is after tax and fees.
ADXIRR = XIRR less total value of arrears 31-60 days or above.

9097
RAR still rising but slowing.

Returning $53.49 per day.

With compounding at current rates, expected values:
$226,208.90 in 5 years
$486,690.05 in 10 years

Very impressive returns. Do you lend much on payment protect loans or do you tend to avoid them?

[777]

5 months in has yet to show up any write offs. I predict that 12 months out from now your XIRR will be closer to 10%.

[Cool Bear]

5 months in has yet to show up any write offs. I predict that 12 months out from now your XIRR will be closer to 10%.
No, it will be at least 13%, more likely mid to high 14+%

[777]

No, it will be at least 13%, more likely mid to high 14+%

Myles is talking tax paid return though.

[Cool Bear]

But the new interest rates will put a dampener to the returns, so assuming a high churn rate of 8 to 10% a month with no new investments, the RAR could drop to just around or below 14%.

[Cool Bear]

Myles is talking tax paid return though.
Ok, then you may be right depending on his tax rate

[myles]

Very impressive returns. Do you lend much on payment protect loans or do you tend to avoid them?
Take them as they come i.e. I don't prioritise either way. Of the all time total 1218 loans, exactly 300 are Payment Protect loans.

[myles]

5 months in has yet to show up any write offs. I predict that 12 months out from now your XIRR will be closer to 10%.
I'm predicting (at the moment), 15.3% - rates have changed but I'll be moving my investment band, so it's a bit tough to predict anything now...

Note: This is with compounding, i.e. all returns are reinvested, it's not a static 100K (currently 105K), so I think 10% is well below likely returns - my thoughts only.

[myles]

Just working it through a bit...

Since it took me a little over 3 months to invest the 100K, lets put the investment equivalent time at 4 months. So at current return I should have 15K clear at 12 months less defaults. To only get 10% I'd have to have 50 new (full) defaults (rounding up to $100 per loan) - but since almost all loans have already returned 4 months of interest/principle, I'd have to be looking at, at least 75 defaults. That's 7.5% pa defaults. My average Harmoney suggested default rate is 1.59%, even if you double that it's not close to 7.5%...

I'm in a unique position to know exactly what has gone in and am not adding or drawing funds, so come 12 months it will be interesting to see where it's ended up.

[bung5]

Good effort getting 100k invested in such a short time. I have only managed to get 15k in 3 months. I'm 80% going for 36 month loans however.
and now looking at only C and D grade

[Investor]

Good effort getting 100k invested in such a short time. I have only managed to get 15k in 3 months. I'm 80% going for 36 month loans however.
and now looking at only C and D grade

Going for only 36 month loans makes it a lot slower.

[leesal]

How can F5 possibly be profitable?

According to the forecasts, annual default rate of 9.49 annually, applied over 5 years gives a loan default rate of 47.5%. The hazard curve then suggests So 24% default against 30% interest in the 1st year.

2nd year and onwards, a severely eroded premium base (even without early repays) , so fall short of recouping default losses through remaining cashflows.

[RMJH]

How can F5 possibly be profitable?

According to the forecasts, annual default rate of 9.49 annually, applied over 5 years gives a loan default rate of 47.5%. The hazard curve then suggests So 24% default against 30% interest in the 1st year.

2nd year and onwards, a severely eroded premium base (even without early repays) , so fall short of recouping default losses through remaining cashflows.
Simplified example in round numbers ignoring repayments and arrears. Say you invested $100k (fully diversified). After one year you would expect 10 to have gone bad and 90 to have paid interest at 30% ($27k) so you would be up $17k before fees and tax and arrears. The next year the same %'s apply but to a lower base so the return would be the same. Personally I think there is better value in the other grades. It's not just the expected return but also the variability that matters.

[leesal]

Personally I think there is better value in the other grades. It's not just the expected return but also the variability that matters.

Agreed


Simplified example in round numbers ignoring repayments and arrears. Say you invested $100k (fully diversified). After one year you would expect 10 to have gone bad and 90 to have paid interest at 30% ($27k) so you would be up $17k before fees and tax and arrears. The next year the same %'s apply but to a lower base so the return would be the same.

Hazard Curve
The forecast default rates are shown as a consistent annual rate over the term of the loan. In reality, defaults are more likely to follow what is known in statistical terminology as a time-varying hazard rate. This chart shows the profile of the hazard curve of the personal loan portfolio to date and shows that almost 60% of the defaults that have occurred may been within the first 15 months of the loan.



If Harmoney's marketing is to be believed, 50% of the defaults occur within 12 months. At grade F5 that gives- 24%. So in the simplistic model 24 gone and 76 paying 30% interest 23%. ~ negative (1%) return.

Year 2 resets itself- 25% more of total defaults - 12 gone, and remaining 64 paying 30% (19.2) = 7.2% return. But if early repayments exceed 20, returns are back to zero.

[Bjauck]

Agreed



Hazard Curve


The forecast default rates are shown as a consistent annual rate over the term of the loan. In reality, defaults are more likely to follow what is known in statistical terminology as a time-varying hazard rate. This chart shows the profile of the hazard curve of the personal loan portfolio to date and shows that almost 60% of the defaults that have occurred may been within the first 15 months of the loan.
Plus defaults are not tax deductible for investors not in business, so the effective tax rate on the blended return (including charge offs) of high risk notes could be well over 33%.

[myles]

If Harmoney's marketing is to be believed, 50% of the defaults occur within 12 months. At grade F5 that gives- 24%. So in the simplistic model 24 gone and 76 paying 30% interest 23%. ~ negative (1%) return.

Year 2 resets itself- 25% more of total defaults - 12 gone, and remaining 64 paying 30% (19.2) = 7.2% return. But if early repayments exceed 20, returns are back to zero.

I think the numbers you are using are very much in favour of showing a larger loss than they should:

Based on 9.49% pa default rate over 5 years the total default rate is actually 32.89% not 47.5% as you suggested above - the 9.49% needs to be applied to what remains, not the original amount each year.

Taking your suggested 50% at 12 months, that's 16.45%, not 24%, the end result will be somewhat different to what you have shown?

Year two, if you take another 50% of what's left as you have, it would not 'reset' itself, it can only be of what is left of expected defaults, which at 50% would be 8.23%, further reducing as it goes... If you focus on the front end losses you miss the fact that you make more gains towards the end of the loans (if they don't get paid out, but if they do that is a gain).

[CageyB]

Is it just me, or has loan volume seemed to have increased since the new scorecard was implemented?

[leesal]

I
Based on 9.49% pa default rate over 5 years the total default rate is actually 32.89% not 47.5% as you suggested above - the 9.49% needs to be applied to what remains, not the original amount each year.

Taking your suggested 50% at 12 months, that's 16.45%, not 24%, the end result will be somewhat different to what you have shown?



Indeed it would :)

Although I get a different result, 39.26%. Are you feeding in early repayment

=9.49+(1-(def+er))*9.49+(1-(def+er)^2)*9.49+(1-(def+er)^3)*9.49+(1-(def+er)^4)*9.49
where er = 9 gives 32.89%

[RMJH]

Indeed it would :)

Although I get a different result, 39.26%. Are you feeding in early repayment

=9.49+(1-(def+er))*9.49+(1-(def+er)^2)*9.49+(1-(def+er)^3)*9.49+(1-(def+er)^4)*9.49
where er = 9 gives 32.89%

I don't think it is as straight forward as that. I would think the default rates would be assessed considering the typical expected life of loans rather than just straight lined average over total life of full term loan. In other words the Hazzard curve is partly allowed for in the annual default rates (ie they are increased). This is borne out by the fact actual defaults are pretty close to expected.

[alistar_mid]

How can F5 possibly be profitable?

According to the forecasts, annual default rate of 9.49 annually, applied over 5 years gives a loan default rate of 47.5%. The hazard curve then suggests So 24% default against 30% interest in the 1st year.

2nd year and onwards, a severely eroded premium base (even without early repays) , so fall short of recouping default losses through remaining cashflows.


Assuming it takes 6 months for the default to register, ie it goes 6 months without it paying you anything, then its defaulted.
Then for year 1, on average...
90.5% of the time you collect a full years interest. 9.5% of the time, you collect sum or no interest (average would be 3 months interest i think).

Year 2, you have got a little bit of capital back, maybe the loans 90% of its original value. so again, 90.5% of the time, you get a full years interest (obv less than year 1), 9.5% of the time it defaults, and you get not as much interest back

Extrapolate this out over a sample of F's, and its profitable.

Model a 30% interest rate on a $100 loan, you only need to last 31 months (out of 60) to get all your $100 back (in nominal terms).

[joker]

Is it just me, or has loan volume seemed to have increased since the new scorecard was implemented?
Yes definitely more loans available - the lower interest rates are very attractive. 6.99% over 5 years for an unsecured loan is exceptional - even better than Heartland Bank's secured mortgage rate! I think that we the lenders will earn a lower RAR over time but Harmoney will be winners with many more $500 lending fees earned funded up front immediately by us?

[joker]

Yes, the lower interest rates are very attractive. 6.99% over 5 years for an unsecured loan is exceptional - even better than Heartland Bank's secured mortgage rate! I think that we the lenders will earn a lower RAR over time but Harmoney will be winners with many more $500 lending fees earned funded up front immediately by us?

And of course there are probably more rewrites as borrowers want to get a lower interest rate. I wouldn't be surprised if Harmoney is sending letters encouraging borrowers to "get more for less".

[icyfire]

Harmoney is in trouble again for breaking the law (https://www.nbr.co.nz/article/commerce-commission-files-civil-proceedings-against-harmoney-over-platform-fees-b-206978)!

[SilverBack]

I have been investing in Harmoney for nearly 2 years now and currently I have placed in excess of 1200 loans.
I thought I would share some thoughts following the recent adoption of a new scorecard. Please excuse me if I repeat some things already commented on but I may have some fresh thoughts all the same.

Interest rates have been lowered. Who is the winner? Why Harmoney, all the way of course. Their return is based on fixed fees while they run NO risk from defaults because it is your money that is lost (recognising that they have structured their fees to cover their costs in managing defaults). They also have a fixed rate of return independent of what the borrower pays. Any reduction in rate is borne by you and NOT Harmoney, as I will soon show.
As the lender you now face a reduced return. Of course you can decide to quit making loans at any time.

My analysis across all my loans is that the actual rate that I receive when a loan when it is repaid is approximately 5% p.a. LESS than the headline rate. That is before tax but after Harmoney fees. A reducing proportion of my loans are on the old scale of 1.25% of interest plus repayments while most of the rest are on 17.5% of gross interest with about 100 at 20% of gross interest. To date the 5% deduction from the headline rate of a loan is a good guide. It does vary a little bit from loan to loan but that continues to be a good guide for my portfolio. I do expect the 5% to increase as my older loans are paid off because the change in the service fee from 1.25% of total repayments to 20%/17.5%/15% of gross interest back in 2016 resulted in a substantial gain by Harmoney. Oh yes, Harmoney made out they were responding to complaints about the service fee going on principal repayments but they took advantage to increase their income substantially when they introduced the new scheme.

Now, the real point of my post is that when Harmoney reduce the headline rates for borrowers they still get approx. 5% on each and every loan but you the lender will suffer the reduced income. Hence, as a private investor, it is foolish to take up an "A" loan category loan with headline rates of 6.99%+ because that will leave you with an effective 1.99%+ interest after fees (more or less). From that you need to deduct the expected default rate. Also, this is for an unsecured loan over 36/60 months. You can get better than that from a bank deposit over the same period with a very low risk rating (close to nil). Hence, I say you are foolish to invest in Harmoney's lowest interest rate loans. If you can tolerate risk (which you must do in order to invest with Harmoney), then finance companies give a better return than most of these A loans.

Don't forget that for private investors like me, defaults are NOT tax deductible and they can seriously affect your effective return. At the moment I lose 21.5% of my net interest (i.e. after tax) on defaults and I am on a low tax rate. These defaults are on top of the effective 5% taken by Harmoney. I have a diversified portfolio with over 90% in the B, C and D grades. My recent RAR is over 16% and so I am not complaining about that but the RAR will now reduce as the new schedule takes effect and as I replace paid off loans with new ones.

There is more I could say from my onging analysis but this is enough for one post.

[myles]

Harmoney is in trouble again for breaking the law (https://www.nbr.co.nz/article/commerce-commission-files-civil-proceedings-against-harmoney-over-platform-fees-b-206978)!
At this point in time they haven't broken the law...the law doesn't cater for peer-to-peer. This is not new, it appears to be a continuation of this (http://www.stuff.co.nz/business/70912502/Harmoney-fees-scrutinised-by-consumer-watchdog) and this (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11701444) - the Commerce Commission seem to have their knickers in a knot, probably because they (ComCom) didn't do their job properly in the beginning...Funny it always seems to come up in August?

[Investor]

I have been investing in Harmoney for nearly 2 years now and currently I have placed in excess of 1200 loans.
I thought I would share some thoughts following the recent adoption of a new scorecard. Please excuse me if I repeat some things already commented on but I may have some fresh thoughts all the same.

Interest rates have been lowered. Who is the winner? Why Harmoney, all the way of course. Their return is based on fixed fees while they run NO risk from defaults because it is your money that is lost (recognising that they have structured their fees to cover their costs in managing defaults). They also have a fixed rate of return independent of what the borrower pays. Any reduction in rate is borne by you and NOT Harmoney, as I will soon show.
As the lender you now face a reduced return. Of course you can decide to quit making loans at any time.

My analysis across all my loans is that the actual rate that I receive when a loan when it is repaid is approximately 5% p.a. LESS than the headline rate. That is before tax but after Harmoney fees. A reducing proportion of my loans are on the old scale of 1.25% of interest plus repayments while most of the rest are on 17.5% of gross interest with about 100 at 20% of gross interest. To date the 5% deduction from the headline rate of a loan is a good guide. It does vary a little bit from loan to loan but that continues to be a good guide for my portfolio. I do expect the 5% to increase as my older loans are paid off because the change in the service fee from 1.25% of total repayments to 20%/17.5%/15% of gross interest back in 2016 resulted in a substantial gain by Harmoney. Oh yes, Harmoney made out they were responding to complaints about the service fee going on principal repayments but they took advantage to increase their income substantially when they introduced the new scheme.

Now, the real point of my post is that when Harmoney reduce the headline rates for borrowers they still get approx. 5% on each and every loan but you the lender will suffer the reduced income. Hence, as a private investor, it is foolish to take up an "A" loan category loan with headline rates of 6.99%+ because that will leave you with an effective 1.99%+ interest after fees (more or less). From that you need to deduct the expected default rate. Also, this is for an unsecured loan over 36/60 months. You can get better than that from a bank deposit over the same period with a very low risk rating (close to nil). Hence, I say you are foolish to invest in Harmoney's lowest interest rate loans. If you can tolerate risk (which you must do in order to invest with Harmoney), then finance companies give a better return than most of these A loans.

Don't forget that for private investors like me, defaults are NOT tax deductible and they can seriously affect your effective return. At the moment I lose 21.5% of my net interest (i.e. after tax) on defaults and I am on a low tax rate. These defaults are on top of the effective 5% taken by Harmoney. I have a diversified portfolio with over 90% in the B, C and D grades. My recent RAR is over 16% and so I am not complaining about that but the RAR will now reduce as the new schedule takes effect and as I replace paid off loans with new ones.

There is more I could say from my onging analysis but this is enough for one post.

You are correct. The new scorecard clearly prices risk less attractively.

I prefer to respect Harmoney as a business operating in the market place. It doesn't matter if investing conditions become less favorable. How can you expect Harmoney to act exclusively in the interests of lenders rather than focusing on its own financial growth? They are still offering a great platform for investing.

[myles]

My analysis across all my loans is that the actual rate that I receive when a loan when it is repaid is approximately 5% p.a. LESS than the headline rate.
That may apply across all of your loans, but I doubt it applies to individual grades of loans i.e. I suspect it would be MUCH less for A Grade loans and MUCH more for F Grade loans?

[icyfire]

It no longer makes sense to invest in grade A loans on Harmoney when you can get the same return at Squirrel Money (SM) at a much lower risk given that SM has a Reserve Fund to cover credit losses.

[Investor]

That may apply across all of your loans, but I doubt it applies to individual grades of loans i.e. I suspect it would be MUCH less for A Grade loans and MUCH more for F Grade loans?

Correct. The analysis was not very calculated.


It no longer makes sense to invest in grade A loans on Harmoney when you can get the same return at Squirrel Money (SM) at a much lower risk given that SM has a Reserve Fund to cover credit losses.

Agreed. I wish that I never invested in any A grade loans as they have limited my RAR thus far. With Scorecard 1.5 they are certainly not an option.

[icyfire]

the Commerce Commission seem to have their knickers in a knot, probably because they (ComCom) didn't do their job properly in the beginning...
You are probably right about ComCom not making the rules tighter right from the outset but my guess is that they didn't anticipate Harmoney charging borrowers a platform fee given that none of the banks charge such upfront credit fees.

[Investor]

You are probably right about ComCom not making the rules tighter right from the outset but my guess is that they didn't anticipate Harmoney charging borrowers a platform fee given that none of the banks charge such upfront credit fees.

The only question was whether or not Harmoney's lending should fall under the Credit Contracts and Consumer Finance Act which it clearly should. I think the Commerce Commission shall have their way with Harmoney.

[icyfire]

The only question was whether or not Harmoney's lending should fall under the Credit Contracts and Consumer Finance Act which it clearly should. I think the Commerce Commission shall have their way with Harmoney.
ANZ charges a one off loan approval fee of $250 and $150 for topping up an existing loan while Harmoney charge $500 for each fee. Are harmoney's loan application and topping-up processes that much more expensive when it's all done online? I'm all for Harmoney building a sustainable and profitable business but they are starting to get pretty greedy IMO.

[Investor]

ANZ charges a one off loan approval fee of $250 and $150 for topping up an existing loan while Harmoney charge $500 for each fee. Are harmoney's loan application and topping-up processes that much more expensive when it's all done online? I'm all for Harmoney building a sustainable and profitable business but they are starting to get pretty greedy IMO.

Harmoney certainly have lower operating costs given the process is (seemingly) largely automated. The 'platform fee' is definitely excessive and not reflective of direct costs incurred when providing lending to an individual. I hope that the Commerce Commission aren't successful with their idea of Harmoney reimbursing borrowers who have paid the platform fee thus far as that could be an expensive exercise for all.

[myles]

Harmoney are currently running at a loss...

Ignoring the changes over the last three years - if each of the 30,000 loans contributed $500 to Harmoney, that's $15,000,000, which is only $5,000,000 per year (ignoring startup costs). I can only guess that they would have in excess of 30 employees, plus the cost of building/work space/equipment, plus the cost of the platform development, maintenance etc (which would not be cheap), plus marketing (those TV ads etc. do not come cheap) etc, etc, etc...

If they didn't charge $500 per loan, they would have to charge more in fees (and yes I realise fees weren't included in the above) - guess who pays the fees???

It's clear that some here have absolutely no clue what costs are likely involved in the operation of Harmoney - me included, but with my background I have a bit more of a clue than most :p

[myles]

From the Harmoney Linkedin page - 51-200 employees...

From Wikipedia (assuming it's accurate):

In June 2016, Harmoney announced that it had generated 8.6 million in revenue for its first full year of operation.[15] This was a loss of $14.2m for the full year, as it continues to invest and grow staff numbers.

So the running cost for 2016 was $22.8 Million...

Lots of info about running costs found here (https://www.nbr.co.nz/article/harmoney-generates-86-mln-revenue-first-year-b-192115). $500 doesn't sound like so much?

[leesal]

Heartland Bank Limited Notes OfferHeartland Bank Limited is making an offer of up to $100 million worth of unsecured, unsubordinated, medium term fixed rate notes with the ability to accept up to $50 million worth of oversubscriptions.

wonder if it will return over 6.99%.

There is a breakdown of Harmoney's loss, of which the largest items were 8.1 of Marketing, 6.3 Staff and 2.1 IT costs (14.5). The large portion of the other costs could be non-recurring items.

Many of those costs should be fixed, so Harmoney should be profitable once it achieves scale. Variable costs such as arrangements with TP lenders will be the interesting part to know

On this there would be a breakeven point, of a certain number of loans.

[leesal]

From the Harmoney Linkedin page - 51-200 employees...

From Wikipedia (assuming it's accurate):

In June 2016, Harmoney announced that it had generated 8.6 million in revenue for its first full year of operation.[15] This was a loss of $14.2m for the full year, as it continues to invest and grow staff numbers.

So the running cost for 2016 was $22.8 Million...

Lots of info about running costs found here (https://www.nbr.co.nz/article/harmoney-generates-86-mln-revenue-first-year-b-192115). $500 doesn't sound like so much?

Harmoney wrote 12,000 loans in that period - and generated 6.3 million in arrangement fee.

Thing is it only wrote 12,500 loans for 12 months ended Mar17. But had 36m of interest paid. Under the new fee model that would have generated 6.5m in fee and 5m in interest cost. Harmoney needs double that to generate a sufficient return for its shareholders.

Problem for Harmoney, is the NZ market has limited scale, its going to struggle to get beyond a certain ceiling in loan #s. If forced to reduce fee to $350, it'd need a 40% hike in lender fees to achieve same revenue, assuming no extra loans.

Issue for lenders, is Harmoney has huge incentives to rewrite loans. Not only for the rewrite fee, but interest in the first year of a loan is considerably more (60% of repayments in a 5 year D grade loan, then 40% in year 3, and plummeting to 10% if makes to year 5!).

[icyfire]

Harmoney are currently running at a loss... (those TV ads etc. do not come cheap) etc, etc, etc... :p
Harmoney spends millions of dollars a year on marketing campaigns but that's not a good reason for being allowed to charge borrowers excessive fees. If Harmoney reduced their marketing budget they would probably be a lot closer to becoming profitable.

[myles]

Harmoney spends millions of dollars a year on marketing campaigns but that's not a good reason for being allowed to charge borrowers excessive fees. If Harmoney reduced their marketing budget they would probably be a lot closer to becoming profitable.
I suspect they would go broke as they wouldn't have new loans...

[myles]

Problem for Harmoney, is the NZ market has limited scale
Probably why they've reached over to Australia hey? Wholesale investment only at the moment - from memory you needed 2 or 20 million to get in the door?


Issue for lenders, is Harmoney has huge incentives to rewrite loans. Not only for the rewrite fee, but interest in the first year of a loan is considerably more (60% of repayments in a 5 year D grade loan, then 40% in year 3, and plummeting to 10% if makes to year 5!).
Not silly are they ;) But they do make more money on fees from interest than the loan fee on a typical loan, but it is over time and is reducing as you point out.

[SilverBack]

That may apply across all of your loans, but I doubt it applies to individual grades of loans i.e. I suspect it would be MUCH less for A Grade loans and MUCH more for F Grade loans?

Hi Myles,
No, my figures show that the 5%, more or less, applies across all grades.

[SilverBack]

Correct. The analysis was not very calculated.


Not so. I have calculated the actual return that I get on every repaid loan using the number of days that the loan was outstanding after deducting the service fees. The only time that there is any significant difference is when the borrower pays off more heavily during the earlier part of the loan rather than a regular monthly payment. The length of time that a loan is outstanding does not make any difference when regular payments are made.

[myles]

No, my figures show that the 5%, more or less, applies across all grades.
You'd have to expand on how that can be. If you have an A grade loan paying 6.99% interest and you pay (I assume by the number of loans you have) a 15% fee on that interest, then your reduction is only 1.05%, where does the other 3.95% disappear too, to make up your suggested 5% drop (1.99% return)?

[RMJH]

I am interested to know who here has stopped investing in A grade after the rate reductions.

I think Auto-lend only allows whole letter grades so you are in or out of As. So far I have stayed in but considering reducing to just B,C and D. 6.99% gross seems too low.

[bung5]

I am interested to know who here has stopped investing in A grade after the rate reductions.

I think Auto-lend only allows whole letter grades so you are in or out of As. So far I have stayed in but considering reducing to just B,C and D. 6.99% gross seems too low.



You can partially invest in the A grade loans by using the interest rate slider. I'm no longer investing in A

[whitt]

You can partially invest in the A grade loans by using the interest rate slider. I'm no longer investing in A
Bung5 is correct. Grade option seems redundant if you use interest slider. just deselect grade as an option and go with interest rates

[BJ1]

There was a comment recently about an apparent increase in the number of loans available, since the rate reductions. I've been looking closely and it seems to me there haven't been many more loans funded, but those that are listed hang around a lot longer, especially the low rate A loans. No longer do I see loans come on the list around 20% funded, last for 5-10 minutes and then disappear as though the wholesale funders then snap up what's left. Perhaps HBL and TSB don't like the unsecured return for A1 to A3 either?

[RMJH]

You can partially invest in the A grade loans by using the interest rate slider. I'm no longer investing in A
Thanks for that. I'm now also out of A's.

[RMJH]

https://blog.zopa.com/2017/08/22/changes-uk-consumer-credit-outlook/

[Investor]

Harmoney are currently running at a loss...

Ignoring the changes over the last three years - if each of the 30,000 loans contributed $500 to Harmoney, that's $15,000,000, which is only $5,000,000 per year (ignoring startup costs). I can only guess that they would have in excess of 30 employees, plus the cost of building/work space/equipment, plus the cost of the platform development, maintenance etc (which would not be cheap), plus marketing (those TV ads etc. do not come cheap) etc, etc, etc...

If they didn't charge $500 per loan, they would have to charge more in fees (and yes I realise fees weren't included in the above) - guess who pays the fees???

It's clear that some here have absolutely no clue what costs are likely involved in the operation of Harmoney - me included, but with my background I have a bit more of a clue than most :p

I was referring to relevant, traceable costs (to the application process) which is what the Commerce Commission will care about when they sit down with Harmoney for a chat.

[joker]

Harmoney posted a loss of $6.5 million in the 12 months ended March 2017 down from $14.2 million for the pcp. Revenue climbed to $14 million from $8.6 million a year earlier, while its biggest expenditure item - marketing - dropped 14 percent to $7 million and staff costs were flat at $6.3 million. Subject to what happens with the ComCom, Harmoney should show a profit in the current year but definitely in 2019.
9113

[myles]

I was referring to relevant, traceable costs (to the application process) which is what the Commerce Commission will care about when they sit down with Harmoney for a chat.
I wasn't specifically referring to what you said - just highlighting that Harmoney are operating at a loss - which leads to the idea that perhaps they are not charging enough to cover their costs, which are clearly not all covered by the platform fee (actually only a relatively small portion are which may well be fair and reasonable)...

I personally am not convinced that the actual case being brought forward (which has nothing to do with the amount being charged), will succeed. From my perspective there is a significant difference between *platform fee* and *credit fee* and how Peer-to-Peer borrowing/investment work - it will be interesting to see the courts *clarification*.

My take on the Fee: Peer-to-peer lending/investment is quite different from traditional banking. The Harmoney platform has been created and is required for the borrowing process to occur, hence all costs associated with it (as hinted at in a number of previous posts), can *reasonably* be charged (the original weighted fee not so much - which could be problematic for Harmoney).

We will just have to wait for the outcome of the initial 'clarification' of *credit fee*. It could be another few years before they get to the actual fee amount...

[Investor]

I wasn't specifically referring to what you said - just highlighting that Harmoney are operating at a loss - which leads to the idea that perhaps they are not charging enough to cover their costs, which are clearly not all covered by the platform fee (actually only a relatively small portion are which may well be fair and reasonable)...

I personally am not convinced that the actual case being brought forward (which has nothing to do with the amount being charged), will succeed. From my perspective there is a significant difference between *platform fee* and *credit fee* and how Peer-to-Peer borrowing/investment work - it will be interesting to see the courts *clarification*.

My take on the Fee: Peer-to-peer lending/investment is quite different from traditional banking. The Harmoney platform has been created and is required for the borrowing process to occur, hence all costs associated with it (as hinted at in a number of previous posts), can *reasonably* be charged (the original weighted fee not so much - which could be problematic for Harmoney).

We will just have to wait for the outcome of the initial 'clarification' of *credit fee*. It could be another few years before they get to the actual fee amount...

Yes it will be very interesting to see how it pans out

[icyfire]

I wasn't specifically referring to what you said - just highlighting that Harmoney are operating at a loss - which leads to the idea that perhaps they are not charging enough to cover their costs, which are clearly not all covered by the platform fee (actually only a relatively small portion are which may well be fair and reasonable)....
Harmoney is only operating at a loss due to spending a huge amount on advertising and that's their choice. Using your argument all banks could argue that they should also be allowed to charge their customers unreasonably high fees so they could cover their marketing costs. Harmoney is now a household name in the NZ P2P lending market and most Kiwis have heard of it. Sorry, but I don't buy your argument and I hope that ComCom are successful in court. Harmoney needs to toe the line and play by the rules.

[myles]

Harmoney is only operating at a loss due to spending a huge amount on advertising and that's their choice. Using your argument all banks could argue that they should also be allowed to charge their customers unreasonably high fees so they could cover their marketing costs. Harmoney is now a household name in the NZ P2P lending market and most Kiwis have heard of it. Sorry, but I don't buy your argument and I hope that ComCom are successful in court. Harmoney needs to toe the line and play by the rules.
? I didn't mention marketing?

Banks typically charge between $250 - $300 - they don't have a peer-to-peer 'platform' like Harmoney do to build/maintain etc? Banks profit from the full Interest rate - Harmoney only receive 15-20% of the Interest in fees charged to lenders not borrowers. There are some significant differences!

There are no specific rules for peer-to-peer lending, that is what the whole issue is about!

[icyfire]

Banks typically charge between $250 - $300
Banks charge $250 for a new loan application and $150 for topping up an existing loan, Harmoney charges $500 for each. The difference is hundreds of dollars which is a lot of money for borrowers already paying a high interest on a loan.


they don't have a peer-to-peer 'platform' like Harmoney do to build/maintain etc
Banks have much bigger IT systems to build and maintain, there isn't even a comparison.


Banks profit from the full Interest rate - Harmoney only receive 15-20% of the Interest in fees charged to lenders not borrowers. There are some significant differences!
The difference is that banks borrow money at 3% from offshore and NZ households and then loan it at 15-20% interest. On the other hand Harmoney uses your money and my money and then charge you and me 15-20% for the privilege.


There are no specific rules for peer-to-peer lending, that is what the whole issue is about!
Yes, there are rules and that's the reason ComCom has decided to take Harmoney to court. The more rules there are around P2P lenders, the more lenders and borrowers will be protected. That's a good thing.

[myles]

icyfire, you really do look at things with tinted glasses :(

[icyfire]

icyfire, you really do look at things with tinted glasses :(
Play the ball, not the player! At the end of the day, the court will decide

[myles]

Play the ball, not the player! At the end of the day, the court will decide
I'm not playing, I'm investing!

Some of what you come up with is just not thought through enough for me to be bothered to address/argue. Sorry...not playing...

[myles]

Very simplified set of numbers of Institution return for a $10,000 loan (please read the notes):
9120
Would a bank offer a loan to a Harmoney C Grade borrower?

[RMJH]

Play the ball, not the player! At the end of the day, the court will decide
ASB made $1,000,000,000 last year. You really think banks like them offer a better deal?! At least P2P is transparent and they don't create money.

[icyfire]

I'm not playing, I'm investing!

Some of what you come up with is just not thought through enough for me to be bothered to address/argue. Sorry...not playing...
I'm not sure you understood what I meant by saying "Play the ball, not the player". It's a saying when playing soccer. What I meant is: argue your point but don't go on a personal attack.

[myles]

I'm not sure you understood what I meant by saying "Play the ball, not the player". It's a saying when playing soccer. What I meant is: argue your point but don't go on a personal attack.
Understood perfectly. Seriously? My comment was an observation...

[icyfire]

Understood perfectly. Seriously? My comment was an observation...
Yes, seriously. Perhaps you are used to making personal attacks on social media , however, this is not the appropriate forum for it.

[myles]

Yes, seriously. Perhaps you are used to making personal attacks on social media , however, this is not the appropriate forum for it.
The appropriate thing to do is to report the post if you have an issue with it...I don't do social media :confused:

[Investor]

ASB made $1,000,000,000 last year. You really think banks like them offer a better deal?! At least P2P is transparent and they don't create money.

This is one of the more short-sighted statements posted in this topic as of late. ASB offer far more than just unsecured lending.

[Saamee]

This is one of the more short-sighted statements posted in this topic as of late. ASB offer far more than just unsecured lending.

Surely Everyone is entitled to "Their Own Opinion" and be able to Voice it here.....

We are all different, all hold differing views and also have different levels of experience - Never forget that!

I'm getting fed up reading the 'Sarky Comments' here :)


PS: Yes I could go away.... If everyone else does the same... What's left!

Maybe the Mods here should start to Moderate using the same rules enforced over a Whale Oil???

[joker]

Surely Everyone is entitled to "Their Own Opinion" and be able to Voice it here.....

We are all different, all hold differing views and also have different levels of experience - Never forget that!

I'm getting fed up reading the 'Sarky Comments' here :)


PS: Yes I could go away.... If everyone else does the same... What's left!

Maybe the Mods here should start to Moderate using the same rules enforced over a Whale Oil???

Yes, I'm with Saamee on this one. I'm looking for constructive info and experience from other users - not wanting to read their tiffs.

If you want to get personal, please do it thru the personal messaging facility - leave the rest of us out of it.

[RMJH]

This is one of the more short-sighted statements posted in this topic as of late. ASB offer far more than just unsecured lending.
The point is they are very highly profitable by world banking standards. If you are happy with this status quo then all good. I wonder how many customers they have? Heck of a lot of net profit per customers no doubt....

[Investor]

Yes, I'm with Saamee on this one. I'm looking for constructive info and experience from other users - not wanting to read their tiffs.

If you want to get personal, please do it thru the personal messaging facility - leave the rest of us out of it.

The problem is that generalizations are being continually posted.

Edit:

If someone posts an extremely 'wide' statement which represents false or misleading information, you should expect people to respond to it. I am not here to argue.

[myles]

I'd never looked hard enough at LC and Squirrel to find their Borrower Platform/Establishment fees - somewhat more 'hidden' than Harmoney's - if it does go south with the Courts all P2P lenders will be affected:

Squirrel:

"Borrowers are required to pay an Establishment Fee deducted from the initial advance of the Loan in the amount of NZ$250 for unsecured Loans and NZ$500 for secured Loans."

Lending Crowd:



Amount
Platform fee


$2,000 - $5,000
$250


$5,000 - $15,000
$350


$15,000 - $50,000
$450


$50,000 - $100,000
$950


$100,000 - $200,000
$1450












It would be particularly bad for LC's bigger loans!

[icyfire]

Neither Lending Crowd nor Squirrel Money have loan rewrites. Harmoney charges $500 for topping up an existing loan (i.e rewrite) while banks only charge $150. Perhaps that's the main reason Harmoney has found itself in trouble with ComCom. We will soon find out.

[myles]

Neither Lending Crowd nor Squirrel Money have loan rewrites. Harmoney charges $500 for topping up an existing loan (i.e rewrite) while banks only charge $150. Perhaps that's the main reason Harmoney has found itself in trouble with ComCom. We will soon find out.
No it's not the main reason for the court request for clarification... At this point they are not 'in trouble', the court has been asked to clarify the fee - full details are available on the Commercial Commission's website if you are interested in factual details.

[icyfire]

Here is the link to Commerce Commission's Media Release about filing proceedings against Harmoney over its platform fee (http://www.comcom.govt.nz/the-commission/media-centre/media-releases/detail/2017/commission-files-proceedings-against-harmoney-over-its-platform-fee)

[myles]

Here is the link to Commerce Commission's Media Release about filing proceedings against Harmoney over its platform fee (http://www.comcom.govt.nz/the-commission/media-centre/media-releases/detail/2017/commission-files-proceedings-against-harmoney-over-its-platform-fee)
Take the time to read past the headlines - the links are all there - you'll find that the initial questions being ask of the courts are to clarify the fee...until that happens any other suggested proceedings are moot.

"The Commission has filed an application under section 100A of the Commerce Act asking the Court a number of legal questions and it expects that the answers will provide more clarity about how consumer credit laws apply to loans offered by Harmoney and other peer-to-peer lenders."

[SilverBack]

You'd have to expand on how that can be. If you have an A grade loan paying 6.99% interest and you pay (I assume by the number of loans you have) a 15% fee on that interest, then your reduction is only 1.05%, where does the other 3.95% disappear too, to make up your suggested 5% drop (1.99% return)?

I have dug a little deeper. You need to understand that I am using empirical data from my own repaid loans and not applying any theory here. The service fee across my data varies from 1.25% of gross interest + principal repaid to 17.5% of gross interest only to 20% of gross interest only. This is because Harmoney changed their commission structure part way through the period and then I had to build my portfolio past $10K to move from the 20.0% to 17.5% rate. For the figures below, I have only used the loans with a 17.5% fee.

The 5% loss of interest was an average across all my repaid loans (all grades and all service fee rates) and only served me as a "rule of thumb". If I use only 17.5% fee the average by grade is:

A - no data
B - 3.7%
C - 4.8%
D - 6.4%
E - 9.9%

These figures are still only approximate because I have not made a true calculation of the net return based on fixed monthly repayments of interest and principal whereby the principal steadily reduces during the period of the loan. Instead I made a simplified calculation of return by using the net interest (before tax) and the number of days that the loan was active. This means that the above figures are higher than the true rate.
I have found considerable variation in the "loss of interest" even across individual grades rather than class of grade. For example, my C3 loans vary from 3.7% to 6.8& and D4 loans vary from 5.1% to 13.1%. I actually asked Harmoney about the 13.1% loan and the reason was because although the borrower had the loan for 171 days, they made some large repayments of principal early in the loan. This reduced the total interest compared to making regular monthly repayments.

If I repeat the analysis using only loans with 1.25% service fee then I get:

A - 4.1%
B - 4.4%
C - 4.4%
D - 4.7%
E - 8.4%

One final observation - including repaid loans with payment protection improves the net return considerably but I excluded them from the above figures.

If anyone can point me to an Excel 2010 formula that lets me calculate the effective interest for a loan with regular repayments given principal, number of repayments, regular repayment amount and total interest paid, then I can get more accuracy.

If anyone is still suspicious of this, then I suggest that you simply carry out an analysis of your own repaid loans. It is not hard to do.

[myles]

I have found considerable variation in the "loss of interest" even across individual grades rather than class of grade. For example, my C3 loans vary from 3.7% to 6.8& and D4 loans vary from 5.1% to 13.1%. I actually asked Harmoney about the 13.1% loan and the reason was because although the borrower had the loan for 171 days, they made some large repayments of principal early in the loan. This reduced the total interest compared to making regular monthly repayments

It sounds to me like you are calculating return based on initial investment, not ongoing/current investment - which reduces over time. If the borrower made large repayments early (as you say in the 13.1% example above), then you had a large amount of principal returned to you early that can no longer be considered invested in that loan i.e. you can reinvest in other loans.


If anyone can point me to an Excel 2010 formula that lets me calculate the effective interest for a loan with regular repayments given principal, number of repayments, regular repayment amount and total interest paid, then I can get more accuracy.

XIRR - is the best way to calculate returns on both individual and combined loans - all you need are the dates and amounts of payments and returns (interest + principal).


If anyone is still suspicious of this, then I suggest that you simply carry out an analysis of your own repaid loans. It is not hard to do.
Not suspicious, just think you may not be calculating your returns correctly. I don't see any anomalies (or interest lost) when I do either individual loan or overall loan calculations on my loans. Take a single loan and work it through using XIRR and see if you get expected results or not.

[alistar_mid]

It sounds to me like you are calculating return based on initial investment, not ongoing/current investment - which reduces over time. If the borrower made large repayments early (as you say in the 13.1% example above), then you had a large amount of principal returned to you early that can no longer be considered invested in that loan i.e. you can reinvest in other loans.



XIRR - is the best way to calculate returns on both individual and combined loans - all you need are the dates and amounts of payments and returns (interest + principal).


Not suspicious, just think you may not be calculating your returns correctly. I don't see any anomalies (or interest lost) when I do either individual loan or overall loan calculations on my loans. Take a single loan and work it through using XIRR and see if you get expected results or not.


This, for all the spreadsheeting I have done, all the RAR's etc, the most accurate measure of return, (for harmoney) is XIRR

The dates the money went in, vs when you got it out

Remember to add in the % of your tax return though that's attributable to Harmoney

[BJ1]

Alister, I don't use XIRR but I have been playing this morning. If I assume a loan of $1,000 @15.16% lent on 14/1/17 and repaid with interest on 14/2/17 then my cash received is $1010.9443 after paying 15% fee to Harmoney which is a rate of 12.886% after fees, as expected. However, using XIRR I get 13.67%. Do you get the same? Putting in the full cash flows over 7 months for the actual loan which was repaid after that time, I get 13.62%. It seems that XIRR doesn't accurately calculate returns, but overstates them. Am I doing something wrong?

[Cool Bear]

Alister, I don't use XIRR but I have been playing this morning. If I assume a loan of $1,000 @15.16% lent on 14/1/17 and repaid with interest on 14/2/17 then my cash received is $1010.9443 after paying 15% fee to Harmoney which is a rate of 12.886% after fees, as expected. However, using XIRR I get 13.67%. Do you get the same? Putting in the full cash flows over 7 months for the actual loan which was repaid after that time, I get 13.62%. It seems that XIRR doesn't accurately calculate returns, but overstates them. Am I doing something wrong?
Hi BJ1

Your post got me stumped for a while too. Had a bit of time while taking a break from my work and did some testing of XIRR.

In the end I realised that the XIRR is correct. The difference is compounding of interest.

Say net interest is 12%, so invest $1000 on 1 Jan and you will get back $1010 on 1 Feb. XIRR is 12.4296%
but invest $1000 on 1 Jan and you get back $1130 (13 months) on 1 Feb the next year. XIRR is 11.924%

In the first case, IF you reinvest the $10 interest on 1 Feb at 12% for the rest of the year (11 months), you should get $124.29 interest in total after 12 months - so XIRR is correct
conversely, the second senario is that had you invested the $120 interest for the first 12 months for that extra month, you should get more than $130 in total, so the $130 is less than 12% and the XIRR of 11.924 is correct.

[BJ1]

Cool Bear, I'm not convinced. Shouldn't the formula return the exact interest rate, calculated on the cash flows stipulated and not make assumptions about reinvestment of cash not recorded in the stipulated flows? For a one month period it should not produce an outcome 3.58% above the actual one month's interest. Should there be compounding in a one month investment? I'll have another play if tomorrow has free time.

[leesal]

Cool Bear, I'm not convinced. Shouldn't the formula return the exact interest rate, calculated on the cash flows stipulated and not make assumptions about reinvestment of cash not recorded in the stipulated flows? For a one month period it should not produce an outcome 3.58% above the actual one month's interest. Should there be compounding in a one month investment? I'll have another play if tomorrow has free time.

The annualised result without reinvestment assumption is fundamentally flawed that it ignores the time value of money.

That would also suggest you would be indifferent to the following cashflows below... Which clearly can not be correct.

1/ negative 10million outflow on 1-January-2017 , then 1 million monthly over the next 12 months.

2/ negative 10million outflow on 1-January-2017, then 12million received on 1-January-2018

[myles]

BJ1, adding NOMINAL(XIRR(...), 12) around your XIRR calculation should give the result you are expecting. (Changes result to monthly rate i.e. from effective to nominal rate)

Note: The XIRR rate (effective) is an annual rate (similar to a term deposit that pays the interest annually).

[BJ1]

I think I'll continue without XIRR. If I plug in two investments of $1,000 at 12% for 12 months and choose monthly cash interest paid for one and cash interest paid at the end for the other I get XIRR rates of 12.6825% on the first and 12.00% on the second. However, both return the same cash to me over 12 months, of $1,120. As I choose to take the interest out for spending in both cases, I have not compounded it and therefore my investment is not worth the $1,126.825 after 12 months that XIRR implies it will be. XIRR also assumes that the monthly interest payments are reinvested at the same rate of 12% from receipt of each. Essentially, I don't see the point in applying XIRR to my portfolio as what matters is that Harmoney calculates and pays interest properly and I then decide what to do - either spend or reinvest. If the former I forego the benefit of compounding and end up with bread on the table but less in the "bank" and if the latter then I starve today. The more I reinvest the more I have for future consumption. I can understand all that without XIRR.

[myles]

All sounds fair for what you want BJ1. The only caution is not to compare monthly interest rates with annual interest rates. For example the RAR value is an annual rate so shouldn't be compared directly to monthly loan rates.

[Darchie]

My charge-off's are still steadily rising .. at this rate it will be $5,000 written off before long ... happy with my decision to unwind all I have left in HM ....

[joker]

My charge-off's are still steadily rising .. at this rate it will be $5,000 written off before long ... happy with my decision to unwind all I have left in HM ....
That doesn't sound too good. Just as an indicator...
1. Were they all $25 investments or larger?
2. Any particular grades over represented?
3. What period of time does the $5000 cover and how big is your total loan book?

TIA Joker

[Investor]

That doesn't sound too good. Just as an indicator...
1. Were they all $25 investments or larger?
2. Any particular grades over represented?
3. What period of time does the $5000 cover and how big is your total loan book?

TIA Joker

Yes it sounds like there was either not enough diversification or Darchie has invested in E-F's

[joker]

Yes it sounds like there was either not enough diversification or Darchie has invested in E-F's

In simple terms, $100k in the old C, D, E & Fs at an average interest rate of (say) 25% would still give an RAR of 20% (before Harmoney's fees) after $5k of charge offs.

[Darchie]

That doesn't sound too good. Just as an indicator...
1. Were they all $25 investments or larger?
2. Any particular grades over represented?
3. What period of time does the $5000 cover and how big is your total loan book?

TIA Joker
Not so easy to answer as my strategy has changed with each round of fee changes.
I see my very first loan taken was on 23.9.15 , B5, 2notes taken - it's still current, not in arrears & ticking along nicely.
In June 2016 my spread was basically:
A 20%
B 28%
C 19%
D 17%
E 10%
F 6%
But recently (since fees changed to 15% ) I've taken no D-F and <6 C grades.
I currently have 98 loans written off so that's an average of pretty much 2notes each.
Loan investment shows as 127k
Interestingly looking at my current grade spread it's now 72% A&B ...
So to me i do not think it is what you could have called high risk behaviour! I just wonder how many more out there have similar high write-offs but do not admit it openly...

[Cool Bear]

So to me i do not think it is what you could have called high risk behaviour! I just wonder how many more out there have similar high write-offs but do not admit it openly...

My writeoffs are much higher than yours both in $ and in numbers. But no point comparing. Our risks spread, total investments, timing of investments etc are all different. The absolute amount is not as important although it still hurts each time.

What I monitor is the RAR and also the net write-offs as a percentage of gross interest received. My RAR is currently about 14.25% and the percentage of net write-offs to gross interest is 20.5%

[alistar_mid]

look at all those sweet writeoffs!

Its really spiked the last couple of months.

9143

[Darchie]

.....it still hurts each time.

What I monitor is the RAR and also the net write-offs as a percentage of gross interest received. My RAR is currently about 14.25% and the percentage of net write-offs to gross interest is 20.5%

Interesting comments Cool Bear ... a lot of the write-offs seem2 start hitting firmly after the 12mth mark ...
My current RAR is 12.21%

[joker]

...it still hurts each time.

What I monitor is the RAR and also the net write-offs as a percentage of gross interest received. My RAR is currently about 14.25% and the percentage of net write-offs to gross interest is 20.5%

These figures are concerning. I guess Harmoney doesn't spend too much time chasing delinquents (costly and we've already funded their $500 platform fee so it's our loss). It will be interesting to see what the effect is of the new lower interest rates and whether the default rates drop to the figures they've forecast. Lower interest rates with static default rates will cause lower a ROI but this won't be clear for a year or two yet.

[myles]

Cool Bear, Darchie, Alistar - are you willing to share the % of: number of default loans / number of total loans and the time frame ?

Clearly this should vary based on loan grade and many other factors, but it would be a useful value to compare against what Harmoney provide.

[Cool Bear]

Cool Bear, Darchie, Alistar - are you willing to share the % of: number of default loans / number of total loans and the time frame ?

Clearly this should vary based on loan grade and many other factors, but it would be a useful value to compare against what Harmoney provide.
I posted that earlier in post 2552 and 2553 but will post it here again:

Every few months or so, I analyse the results of loans up to a certain date so that the analysis is not diluted with new loans after that date.

Between June 2015 to December 2016 (18 months), I made 3726 loans. Results as at 1 July 2017.
As I cannot align the columns the last time, they are in the order:

grade
number of loans
% $current/$invested
% $principal paid/$invested
% $writeoffs/$invested
% Total

a 547 27.1% 72.9% 0.0% 100.00%
b 832 31.1% 67.6% 1.2% 100.00%
c 741 36.6% 62.1% 1.2% 100.00%
d 790 40.9% 55.8% 3.3% 100.00%
e 501 33.7% 54.2% 12.0% 100.00%
f 315 32.6% 53.1% 14.3% 100.00%

total 3726 34.3% 62.2% 3.4% 100.00%

results as at 1st July 2017 for all loans invested from Jun 2015 to 31/12/2016

note: %ages are based on actual $ value of loans not number of loans. The number of loans is just for information to give an idea of the population size

[myles]

results as at 1st July 2017 for all loans invested from Jun 2015 to 31/12/2016

note: %ages are based on actual $ value of loans not number of loans.

Thanks appreciate it - probably not much difference from dollars to numbers considering the volume of loans you've had - assuming they are all about the same size.

Since Harmoney numbers are stated as percent per annum, your numbers appear mostly a little lower than what Harmoney have suggested for the old rates:




Actual Rate / 2
Harmoney per annum (avg for grade)


A
0.00%
0.17%


B
0.60%
0.53%


C
0.60%
0.60%


D
1.65%
2.00%


E
6.00%
4.28%


F
7.15%
10.62%



E Grade being the only significant exception.
Not taking into account how you've selected loans, which would no doubt influence the comparison, and that the period is only 2 years so not a full representation of the life of loans.

Added: Probably shouldn't have based this on 2 years as the age of loans varies from 2 years to 6 months...which would likely bring it much closer or a bit above Harmoney suggested values...still in the same ballpark either way.

[Cool Bear]

Thanks appreciate it - probably not much difference from dollars to numbers considering the volume of loans you've had - assuming they are all about the same size.

Since Harmoney numbers are stated as percent per annum, your numbers appear mostly a little lower than what Harmoney have suggested for the old rates:




Actual Rate / 2
Harmoney per annum (avg for grade)


A
0.00%
0.17%


B
0.60%
0.53%


C
0.60%
0.60%


D
1.65%
2.00%


E
6.00%
4.28%


F
7.15%
10.62%




E Grade being the only significant exception.
Not taking into account how you've selected loans, which would no doubt influence the comparison, and that the period is only 2 years so not a full representation of the life of loans.

Added: Probably shouldn't have based this on 2 years as the age of loans varies from 2 years to 6 months...which would likely bring it much closer or a bit above Harmoney suggested values...still in the same ballpark either way.

Assuming that my loans were evenly spread over the period, then the newest loan was only about 6 months (December 2016 as at 1 July 2017) and the oldest 24 months (June 2015 as at 1 July 2017). So a simple average is 15 months old (6+24)/2. So dividing my defaults by 2 is not correct. Should be 1.25.




Actual Rate /1.25
Harmoney per annum (avg for grade)


A
0.00%
0.17%


B
0.96%
0.53%


C
0.96%
0.60%


D
2.64%
2.00%


E
9.60%
4.28%


F
11.44%
10.62%





I had always maintain that Harmoney old default rates were too low. My calculated default/interest for the loans during that period is about 13% (based on Harmoney's figures) but the actual was closer to 20%. E grade was especially bad. And it was interesting to see that Harmoney new default rates actually increases (Scorecard 1.5)for the new E grade compared to their old ones whereas the default rates for all other grades decreases.

[myles]

Yep, I did add that to my post - you may have missed it. Still, all are 'around' the Harmoney numbers except those E's - which 'appeared' to be the better option based on supplied numbers, but not so? :(

Added: Having said that, based on the expected 'bulk' of defaults from either the new or old Hazard curve, using 1.25 might be a bit low? (as more defaults occur well before the 2 year point)

[Investor]

And it was interesting to see that Harmoney new default rates actually increases (Scorecard 1.5)for the new E grade compared to their old ones whereas the default rates for all other grades decreases.

True but keep in mind someone who applied prior to Scorecard 1.5 may not be given the same grade as they would on 1.5.

[BJ1]

I just wonder how many more out there have similar high write-offs but do not admit it openly...
My average loan is $671. I've had two writeoffs, the largest being $382 on a $500 loan taken as one of the first four invested back in Feb2015. I hate taking hits which is why my spread is the way it is. I'm not after top % but an average I can live with. I ignore RAR and look only to current return and my projection - which sadly is now falling with the new rates in place. Given that the opportunities for these returns are very limited, Harmoney will continue to represent a solid percentage of my portfolio - for the next couple of years it should outperform most other options, so accepting that defaults will occur is just part of the business.

[leesal]

Good to have this type of discussion for us newish investors :)

I've just run some stats on default. And looking at the posted stats on this board, I am genuinely surprised the Interest / Charge Off Stat are so Good!

Running comparatives off Lending Club, shows






delinq/iss*
chg/iss

chg/int


lending club
2017 Q1 & Q2
1.3%
0.1%

3%


lending club
2016 Q3 & Q4
4.8%
2.1%

23%


lending club
2016 Q1 & Q2
7.7%
5.5%

44%


lending club
2015 Q3 & Q4
9.3%
7.6%

50%


lending club
2015 Q1 & Q2
10.3%
9.3%

52%


lending club
2014 Q3 & Q4
10.2%
9.7%

48%


lending club
2014 Q1 & Q2
9.9%
9.6%

43%










lending club
Q3 2015 to Q2 2017
6.0%
4.1%

39%


harmony
All
6.5%
2.8%

21%



* Delinq = in arrears + charge off*
** HM “late” definition slightly wider, LC removes 1-15 day


Harmoney is roughly tracking Lending Club on delinquency, so Charge/Issue should project to 10%.

A couple of observations.


Harmoney’s Late / Charge off is HUGE. Is sitting at 132% compared LC 46% (Q3 2015+)
Delaying moving arrears to charge off artificially inflates platform RAR. By approx 2% if 50% delayed
There is a MASSIVE difference between retail and wholesale, 2.5%. If mix on grading is equal, wholesale defaults calculate out as 3 times greater then retail!





RAR
prop %
charge
i nt
issue
days

chg/iss


Overall
11.5%

15542
72,795
558,230
325

2.78%













Retail
13.2%
30%
2100
21,839
167,469


1.25%


Wholesale
10.8%
70%
13442
50,957
390,761


3.44%

[leesal]

My average loan is $671. I've had two writeoffs, the largest being $382 on a $500 loan taken as one of the first four invested back in Feb2015. I hate taking hits which is why my spread is the way it is. I'm not after top % but an average I can live with. I ignore RAR and look only to current return and my projection - which sadly is now falling with the new rates in place. Given that the opportunities for these returns are very limited, Harmoney will continue to represent a solid percentage of my portfolio - for the next couple of years it should outperform most other options, so accepting that defaults will occur is just part of the business.

Charge off 3% of Interest after 2 & half years invested is fantastic!

[alistar_mid]

Cool Bear, Darchie, Alistar - are you willing to share the % of: number of default loans / number of total loans and the time frame ?

Clearly this should vary based on loan grade and many other factors, but it would be a useful value to compare against what Harmoney provide.

heres some info for you

9150

[myles]

Charge off 3% of Interest after 2 & half years invested is fantastic!
Agree! Only having two in that timeframe is impressive. I've just taken my first two in only 6 months of investing :(

[myles]

heres some info for you
Thanks Alistar - you really are starting to take a bit of a pounding, but your returns are still looking good - par for the course I guess.

[alistar_mid]

Thanks Alistar - you really are starting to take a bit of a pounding, but your returns are still looking good - par for the course I guess.

yeah my a$$ is pretty sore right now - the last 2 days had another $500 of write offs come in.

post tax IRR based on money in and money out is now < 10%

[joker]

My average loan is $671. I've had two writeoffs, the largest being $382 on a $500 loan taken as one of the first four invested back in Feb2015. I hate taking hits which is why my spread is the way it is. I'm not after top % but an average I can live with. I ignore RAR and look only to current return and my projection - which sadly is now falling with the new rates in place. Given that the opportunities for these returns are very limited, Harmoney will continue to represent a solid percentage of my portfolio - for the next couple of years it should outperform most other options, so accepting that defaults will occur is just part of the business.

Very respectable figures BJ1 and a very low charge back sum compared to others. Well done!

[joker]

yeah my a$$ is pretty sore right now - the last 2 days had another $500 of write offs come in.

post tax IRR based on money in and money out is now < 10%

You must be doing some very heavy hitting Alistar. In three weeks (18 Apr - 11 May) both your total invested and principle outstanding increased by around $30,000 but the total number of loans only increased by 14. That's around $2000 per loan and presents a real opportunity for big charge-offs.
9152

[permutation]

I see some people taking large numbers of notes per loan, surely the risk becomes massive especially with E,F grades.

Have only taken 101 E,F grades since March 2015 and stopped investing late last year. There are now only 26 active loans, have had 15/101 defaults in E and F being a 14.85% default rate.

Yet have taken 1259 A_D grade loans over the last 30 months and have 8/1259 defaults being 0.635%

My RAR has climbed to 14.55% being 3.05% above the platform RAR to date. I now only lend in 12 sub-grades.

I also take into account Payment Protect fees less Lender/ Borrower rebates in my $value charged off v Gross interest ratio. Which reduces this figure from 12.74% to a 6.48% Gross interest loss.

Ideally over time I would like the net Payment Protect figure to cancel out the Charge off $ value.

9154

[alistar_mid]

You must be doing some very heavy hitting Alistar. In three weeks (18 Apr - 11 May) both your total invested and principle outstanding increased by around $30,000 but the total number of loans only increased by 14. That's around $2000 per loan and presents a real opportunity for big charge-offs.
9152

Nah average loan value is $93.

Theres a lag from when you place them to when they show up in reporting (the csv download)




10-Mar-17
24-Mar-17
18-Apr-17
11-May-17
31-May-17
09-Jun-17
07-Jul-17


Total Invested
$ 69,173
$ 70,122
$ 73,014
$ 104,364
$ 117,166
$ 116,918
$ 116,466












Principle Outsanding
$ 61,815
$ 61,200
$ 62,072
$ 90,073
$ 99,911
$ 98,085
$ 92,094


Principle Paid up
$ 7,359
$ 8,922
$ 10,942
$ 14,292
$ 17,255
$ 18,833
$ 24,372












Principle Outsanding "Live"
$ 51,272
$ 57,745
$ 57,882
$ 58,688
$ 73,239
$ 84,112
$ 91,068




The principle "live" is reflective of the number of loans showing up

[Cool Bear]

There is someone with 5825 loans and a RAR of 16.15% currently on the market stats page. That RAR is amazing for that number of loans. That graph changes daily and his/her loans will be higher than 5825 tomorrow. Would love to know how he/she achieve that.

[myles]

There is someone with 5825 loans and a RAR of 16.15% currently on the market stats page. That RAR is amazing for that number of loans. That graph changes daily and his/her loans will be higher than 5825 tomorrow. Would love to know how he/she achieve that.
I hit 17% RAR today with 1180 active loans at just short of $100 per loan - if that was at $25 per loan it would be almost 5000 loans - is there much difference? My RAR is higher than others I've seen mostly because I've taken no A Grade loans (a couple of early ones) - my loan range is from B3 to E3 (mostly). I expect to take a bit of a hit over the next little while as defaults kicking in.

[Cool Bear]

I hit 17% RAR today with 1180 active loans at just short of $100 per loan - if that was at $25 per loan it would be almost 5000 loans - is there much difference? My RAR is higher than others I've seen mostly because I've taken no A Grade loans (a couple of early ones) - my loan range is from B3 to E3 (mostly). I expect to take a bit of a hit over the next little while as defaults kicking in.
The difference was that I presume that 5825 (5832 16.18% at the moment) was over 2 years and you had been in for much less than that. But then again maybe you are right and it was the A and F loans that pull the rest of our RAR down.

[myles]

The difference was that I presume that 5825 (5832 16.18% at the moment) was over 2 years and you had been in for much less than that. But then again maybe you are right and it was the A and F loans that pull the rest of our RAR down.
I suspect it's influenced a reasonable amount by how loans are selected as well - things like; repayment to income ratio, income size, borrower type/details, loan purpose etc. - some of these details were highlighted a while back based on stats from overseas - everyone does this differently and no doubt some get it more 'right' than others, more so when it comes to defaults - though I suspect defaults can hit any 'type' of loan, but some would be more susceptible than others?

If there is a 'perfect' selection of loans to maximise returns, how would it hold up to changes in the economy etc. Chasing rainbows and unicorns :p

[whitt]

i have been investing with Harmoney since October 2016 and my RAR is sitting at 14.99% currently.
Initially my RAR was much higher but most loans that defaulted didnt for quite some time then they start defaulting.

To compare RAR figures with ourselves I wouldnt really take much notice of new investors RAR untill they hit 12 or 18 months which is the timeframe my RAR took to stabilise

[Cool Bear]

i have been investing with Harmoney since October 2016 and my RAR is sitting at 14.99% currently.
Initially my RAR was much higher but most loans that defaulted didnt for quite some time then they start defaulting.

To compare RAR figures with ourselves I wouldnt really take much notice of new investors RAR untill they hit 12 or 18 months which is the timeframe my RAR took to stabilise
Yes, I wonder if there is any investor here who had been in for more than 24 months and with a RAR of 15+%

[myles]

To compare RAR figures with ourselves I wouldnt really take much notice of new investors RAR untill they hit 12 or 18 months which is the timeframe my RAR took to stabilise
Agree. Most RAR graphs appear to peak between 6 and 9 months, and then drop to a long term stable value after 12 - 15 months. The drop appears to be from 1% to 1.5%, but that would vary greatly on the loan grade spread etc.

Because I've put money in quickly and have stopped adding 'new money', I *suspect* I'll see a fairly quick and significant drop when it happens (probably early ~ 10 - 12 months in)?

[permutation]

Yes, I wonder if there is any investor here who had been in for more than 24 months and with a RAR of 15+%

Continuing from my post on the previous page, my RAR has now increased from 14.55% to 14.72% last Sunday.

Have been in for 30 months and through re-concentrating my lending to specific sub-grades over a number of months, I have a RAR that has steadily increased from 13.91% in April 2017 to 14.39% in June. Today my RAR is 3.22% above the platform, expect to go 15+% soon.

[Investor]

Interesting loan today

BORROWER COMMENTSthe cash will be used to purchase items for me to do airsoft games and in this better my fitness as that of others and keep my car running in tip top safe condition so to enable me to help others to go to the games and enjoy them as much as I do

[Cool Bear]

Continuing from my post on the previous page, my RAR has now increased from 14.55% to 14.72% last Sunday.

Have been in for 30 months and through re-concentrating my lending to specific sub-grades over a number of months, I have a RAR that has steadily increased from 13.91% in April 2017 to 14.39% in June. Today my RAR is 3.22% above the platform, expect to go 15+% soon.
Well done!!

[Cool Bear]

I remember reading somewhere that Harmoney intends to adjust the RAR to take into account Payment Protect which increases your Outstanding Principal. If they do, it will bump the RAR by about 1% to 1.5%.

At the moment RAR is dropping with the new lower interest rates taking effect - you can see the drop in the Market Stats from early this month. The cynic in me sees HM as trying to present the platform RAR above 10 or 11% as there is a possibility that it could drop below 10% otherwise.

However, even if they do not add the increase principal, the present RAR already reflects the higher repayments to investors due to the increased o/s principal and the slight increase in interest received due to the higher o/s principal. And over time, the total effects of Payment protect will be captured by the present RAR anyway.

[whitt]

Yes, I wonder if there is any investor here who had been in for more than 24 months and with a RAR of 15+%
Oops sorry my post was a typo.
I have been investing since October 2015. My Rar is since that date.

[CageyB]

Yes, I wonder if there is any investor here who had been in for more than 24 months and with a RAR of 15+%

I've been in for 18 months, currently 15.59% as reported by Harmoney. I expect it to drop a bit in the next few months as I move further along the default timeline curve.

[whitt]

I've been in for 18 months, currently 15.59% as reported by Harmoney. I expect it to drop a bit in the next few months as I move further along the default timeline curve.
I am constantly depositing funds into Harmoney each week, My RAR is now fairly stable as the newer loans (with fewer defaults) offset the older loans ( which have more defaults).

[CageyB]

I am constantly depositing funds into Harmoney each week, My RAR is now fairly stable as the newer loans (with fewer defaults) offset the older loans ( which have more defaults).

I understand, but my rate of investment has not been constant. I've been ramping up the rate of investment over those 18 months so the later, larger portion of the loans are not yet 12 months old, so I expect defaults to increase.

[Cool Bear]

I understand, but my rate of investment has not been constant. I've been ramping up the rate of investment over those 18 months so the later, larger portion of the loans are not yet 12 months old, so I expect defaults to increase.

I am constantly depositing funds into Harmoney each week, My RAR is now fairly stable as the newer loans (with fewer defaults) offset the older loans ( which have more defaults).
Yes, all our RARs are affected by new loans and investments. So, someone who had put in all their money at one go at the very beginning and had been taking out all cash as it comes available will probably have a lower RAR. Besides selection of loans and grades, it is very much affected by the timing of our investments - whether we drip feed, ramp up or down or all in one go.

Putting in new money will on one hand raise the RAR as the new loans did not have enough time to go into defaults. On the other hand, it will lower the RAR in the first month of those loans as the interest for those loans have not kick in.

I suppose the real RAR is when we see through all the investments and have zero balance in outstanding loans at the end of 5 or more years having taken out all our cash by then.

[Investor]

Yes, all our RARs are affected by new loans and investments. So, someone who had put in all their money at one go at the very beginning and had been taking out all cash as it comes available will probably have a lower RAR. Besides selection of loans and grades, it is very much affected by the timing of our investments - whether we drip feed, ramp up or down or all in one go.

Putting in new money will on one hand raise the RAR as the new loans did not have enough time to go into defaults. On the other hand, it will lower the RAR in the first month of those loans as the interest for those loans have not kick in.

I suppose the real RAR is when we see through all the investments and have zero balance in outstanding loans at the end of 5 or more years having taken out all our cash by then.

The RAR calculation is based on outstanding principle so if someone was withdrawing regularly from their account, it would not directly effect their RAR.

"RAR shows returns on money invested, not all funds in your Harmoney account."

[Cool Bear]

The RAR calculation is based on outstanding principle so if someone was withdrawing regularly from their account, it would not directly effect their RAR.

"RAR shows returns on money invested, not all funds in your Harmoney account."
I understand RAR perfectly. My point on that someone taking out money is not that leaving it there affects his/her RAR. It is that he/she do not reinvest into any new loans. You have to read my whole post to get the context.

"So, someone who had put in all their money at one go at the very beginning and had been taking out all cash as it comes available will probably have a lower RAR."

[bartholemew]

Gotta love some of the comments borrowers put in, hoping it will help them out :

Will definitely help, My car needs a new gear box and at the moment i dont have much money to fund it. So this will definitely help seeing is i need my car for getting to work. I promise once i have the money i will pay my loan off quicker.

[Investor]

Gotta love some of the comments borrowers put in, hoping it will help them out :

Will definitely help, My car needs a new gear box and at the moment i dont have much money to fund it. So this will definitely help seeing is i need my car for getting to work. I promise once i have the money i will pay my loan off quicker.

Probably a 20k+ car "for getting to work"

[RMJH]

Gotta love some of the comments borrowers put in, hoping it will help them out :

Will definitely help, My car needs a new gear box and at the moment i dont have much money to fund it. So this will definitely help seeing is i need my car for getting to work. I promise once i have the money i will pay my loan off quicker.
Yes, been some classics. My "favourite" of the week has to be "Thanks Harmoney, the more I borrow the lower the interest rate" I think it was a $70k A1 loan too!

[Saamee]

See Harmoney have updated their Log In Screen ( after you have Logged Off ) today :)

[Saamee]

See Harmoney have updated their Log In Screen ( after you have Logged Off ) today :)

Update: Monday, Logoff has fallen back to the Old Style this morning!

Sunday HM testing maybe?

[darrenc]

Yes, I wonder if there is any investor here who had been in for more than 24 months and with a RAR of 15+%
22 months and 15.07% with $80K. It was up at 16.7% until a shocker of a month 2 months ago saw my losses climb from $2000 to $4500!
I'm in the process of gradually withdrawing and putting it into Lending Crowd to balance the portfolio (and because they are guaranteed). I'm at 14.24% in LC, although it's pretty hard to get into the loans.

[alistar_mid]

22 months and 15.07% with $80K. It was up at 16.7% until a shocker of a month 2 months ago saw my losses climb from $2000 to $4500!
I'm in the process of gradually withdrawing and putting it into Lending Crowd to balance the portfolio (and because they are guaranteed). I'm at 14.24% in LC, although it's pretty hard to get into the loans.


https://www.youtube.com/watch?v=l1dnqKGuezo

damn, I'm in for just over $100k but been in 12 months, went from $1,200 in losses to $1,700 in 2 weeks

What grade are most of your losses btw?

[Cool Bear]

22 months and 15.07% with $80K. It was up at 16.7% until a shocker of a month 2 months ago saw my losses climb from $2000 to $4500!
I'm in the process of gradually withdrawing and putting it into Lending Crowd to balance the portfolio (and because they are guaranteed). I'm at 14.24% in LC, although it's pretty hard to get into the loans.
Wow, $4500 out of $80,000 is high but then your 15.07% RAR is high too, so your investment must be on the higher risk spectrum. And 14.24% in LC is also high.
My HM is 14.3% RAR after 27 months with 6000+loans. My LC is just 12.26% and just a fraction of my HM investments. By the way, LC loans are no doubt less risky but just secured and not guaranteed. The portfolio I managed (for the family) has some money in ANZ serious saver earning just 2+% so I do not mind having higher risk HM loans to balance it out.

[myles]

$4500 from $80K in almost 2 years is only around 3% pa defaults - that's actually not bad, especially considering the RAR!

[whitt]

$4500 from $80K in almost 2 years is only around 3% pa defaults - that's actually not bad, especially considering the RAR!
and 15.07% rar too
Not sure why you would withdraw funds to move with LC when you already get good results.
Harmoney also has auto invest options

why npt invest in both isntead

[permutation]

I think the most important indicator of portfolio performance is the "$ value default amount v $Gross Interest received", and the time frame that these figures have occurred.

Principal invested and withdrawn is always a variable figure and has no real relevance to the performance.

[myles]

I think the most important indicator of portfolio performance is the "$ value default amount v $Gross Interest received", and the time frame that these figures have occurred.

Principal invested and withdrawn is always a variable figure and has no real relevance to the performance.
Disagree. You need to take into account the amount you have invested to determine your return on that investment. Defaults to Interest ratio will vary depending on the grades you select and does not indicate 'performance' at all?

[permutation]

I was writing about 'portfolio performance" not "portfolio return", the idea is to invest in quality grade loans to minimize your gross interest losses.

[myles]

I was writing about 'portfolio performance" not "portfolio return", the idea is to invest in quality grade loans to minimize your gross interest losses.
Still don't agree. Example:

$10,000 invested

Protfolio 1:
------------
7% interest with 0.2% defaults => $700 interest - $20 defaults (35:1 ratio) => return $680

Portfolio 2:
------------
28% interest with 0.8% defaults => $2800 interest - $80 defaults (35:1 ratio) => return $ 2720

Both of the above have the same Gross Interest vs Default ratio, both have the same investment amount, one returns $680 the other returns $2720.

I don't think they are equivalent when considering 'portfolio performance'.

For Portfolio 2 to return a similar amount to Portfolio 1 the default rate needs to be a little over 21% (4:1 ratio).

For Portfolio 1 to return a similar amount to Portfolio 2 the amount invested needs to be $40000 (vs $10000 for portfolio 2).

[alistar_mid]

yeah you all realize ultimately it comes back to IRR on money in, money out?

[permutation]

..........Example:

$10,000 invested

28% interest with 0.8% defaults => $2800 interest - $80 defaults (35:1 ratio) => return $ 2720....

The problem is you can't get this kind of high interest with a very low default rate. Ultimately high risk grades will crush your overall return, over time.

[Cool Bear]

yeah you all realize ultimately it comes back to IRR on money in, money out?
Yes, it is how much $$$ we made after a certain point of time or, if you like, at the end of it all. That is measured effectively by Harmoney's RAR which is the same as XIRR (or IRR). The only difference between HM's RAR and our XIRR/IRR is that HM's RAR do not take into account the cash sitting there while most of us in using IRR/XIRR will take into account all cash flows (including cash sitting there waiting for loans)

[myles]

The problem is you can't get this kind of high interest with a very low default rate. Ultimately high risk grades will crush your overall return, over time.
Disagree - see rest of the example... If you pick poorly in the higher risk grades, perhaps, but the right mix of higher risk/interest loans vs low risk/interest loans will ALWAYS outperform (unless something dramatic happens and there is a large run on defaults).

[myles]

That is measured effectively by Harmoney's RAR which is the same as XIRR (or IRR). The only difference between HM's RAR and our XIRR/IRR is that HM's RAR do not take into account the cash sitting there while most of us in using IRR/XIRR will take into account all cash flows (including cash sitting there waiting for loans)
The calculations of RAR and XIRR are quite different?

[whitt]

My RAR graph has recently take a noticeable spike downwards. This is during last update of graph by Harmoney. A approximate 1% crash instantaneously and am now sitting at 13.99%. I haven't had any charge offs for sometime so am unsure why it could drop so quick.

What about others?
Has there been new fees etc that just begun showing in latest RAR graph?

[myles]

What about others?
Mine went from 17.0% down to 16.67% with no obvious reason. I don't hold all that much faith in the supplied RAR..

[BJ1]

Mine went from 17.0% down to 16.67% with no obvious reason. I don't hold all that much faith in the supplied RAR..

My RAR hasn't suffered the declines reported on the last two postings. Over the past month it has tracked as I expected. That said,
looking at the portfolio graph on the website I can see there is one investor with 13,353 loans at an RAR of 13.50%. Where are Heartland's and TSB's loans on this graph? Wouldn't they have more than that number? And I've said it before and will again, any formula which creates a reported loss in excess of 100% has shortcomings. There is also 1 unique loan with an RAR of 39.51% - against a max gross rate of 39.99 less fees - how does that calculate with fees at either 1.25% on total repaid or 20% on interest only. And, later, I see there is an RAR of 130% on 3 loans.
I suggest the RAR should be ignored - it is historical and no guide to personal portfolio performance going forward.

[Cool Bear]

The calculations of RAR and XIRR are quite different?
Yes, the calculations are different but in theory, they should yield the same results as both are based on actual cash flows. The difference will be due to Harmoney not taking into account cash sitting in our account and also when we do our own XIRR, it is after tax. Even if we add back tax, the result will be different as timing of payments is very important in the calculations (time value of money).

I think HM's RAR is quite reliable. As to why some of the investors here have RAR dropping, it can be explain - can be quite a few things, they have taken up a lot of loans recently and the interest have not been received yet, or their arrears have grown (again interest not received yet), or HM had a backlog of processing payments by borrowers (I notice that they do it in spurts), or the effect of the lower interest on the new loans since mid August.

As for BJ1 post, I am not able to think how that 130% (3 unique loans) can be achieved so must be a mistake or .... The others can be due to timing. Eg. the high losses, if you lose all your money in 6 months, your RAR is -200% (annualised)

[myles]

RAR still doesn't account for Payment Protect and the timing is very problematic. My current XIRR is 17.38% (which includes tax deductions), my current supplied RAR is 16.67% (which does not include tax deductions). I know which one is the more accurate/reliable figure for me ;) RAR is a semi useful comparative value, but for me, that is all it is.

[myles]

6 months in ($100K added, no withdrawals):



Total Loans:
1292




Overall Avg:
$91.87




Paid Off:
98
7.59%


Arrears:
$73.60




1-30
11
0.85%


31-60
15
1.16%


61-90
5
0.39%


Charged Off:
2
0.15% (C5, D4) $155.77



The paid off value has doubled from the last month, which is most likely due to smarter borrowers rewriting loans to access better interest rates? Certainly not the landslide some thought might happen.

The 31-60 and 61-90 arrears values have increased, so I'm no doubt going to get a few more defaults drift through, but overall not looking too bad at this stage.

No E grade defaults is interesting since they represent around 15% of loans?

Total value increase (after tax and fees): $6,518.73

9183
XIRR value is after tax and fees.
ADXIRR = XIRR less total value of arrears 31-60 days or above.

Investment is returning $46.38 per day.

9184
Nice consistent 'gain' graph.

Won't continue posting these monthly - maybe every 2 months...

[darrenc]

https://www.youtube.com/watch?v=l1dnqKGuezo

damn, I'm in for just over $100k but been in 12 months, went from $1,200 in losses to $1,700 in 2 weeks

What grade are most of your losses btw?

Most losses are in E and F. I stopped investing in those grades a while ago, but there were plenty of loans in those grades.
The spread is about:
A = 4% (only invested in A right at the beginning and don't now because I don't want to drag the average down)
B = 20% (only invest in B5 now as I don't want to drag the average down)
C = 40%
D = 23% (don't invest in anything D3 or above now because those are the loans that failed most frequently)
E = 10%
F = 3% (haven't put anything in F grade for about 6 months; it was twice this)



and 15.07% rar too
Not sure why you would withdraw funds to move with LC when you already get good results.
Harmoney also has auto invest options

why npt invest in both isntead

I've got $77k in Harmoney and $19k in LC. I'm aiming to level them out a bit to spread the risk. I only invest in B1 and B2 in LC, but it's tricky to get into the loans because they go really quickly. I put $150 in each one. No losses so far. I do have a few A-grade loans from right at the beginning dragging the average down.

I'm actually thinking of pulling more money out in the medium term (e.g. next 12 months) because people are starting to hate property which means there will be some deals.

Re the other post about investment split, I don't have Lego, but I do have a 1985 Skyway Streetbeat BMX in condition 9.5/10 worth about $3k :) Those things are rare in mint condition. I'm looking for old synthesizers, but I think I've missed the boat on that one. Plus, I have a couple of ounces of gold. I did have 80kg of silver but sold that once it had peaked and was on its way down. That paid off my mortgage.

[myles]

Just a thought on the difference between the supplied RAR and XIRR - RAR is calculated at loan level whilst XIRR is typically calculated at investment (overall) level. This difference is significant in that XIRR is an indicator of return on your initial investment, whilst RAR is an indicator of average return of all loans. The difference might not be clear and is a little difficult to explain.


If you are reinvesting returns, then the RAR calculation doesn't see the reinvestment in the same way as the XIRR calculation does. Any reinvestment is seen as an overall gain by the XIRR calculation, i.e. the total value of the investment increases for that time period. RAR just sees reinvestment as an additional loan with a return that gets averaged with the rest of the loans.


So RAR is an indicator of loan returns whilst XIRR is an indicator of investment return.


I don't know if that makes sense or not?

[Cool Bear]

Just a thought on the difference between the supplied RAR and XIRR - RAR is calculated at loan level whilst XIRR is typically calculated at investment (overall) level. This difference is significant in that XIRR is an indicator of return on your initial investment, whilst RAR is an indicator of average return of all loans. The difference might not be clear and is a little difficult to explain.


If you are reinvesting returns, then the RAR calculation doesn't see the reinvestment in the same way as the XIRR calculation does. Any reinvestment is seen as an overall gain by the XIRR calculation, i.e. the total value of the investment increases for that time period. RAR just sees reinvestment as an additional loan with a return that gets averaged with the rest of the loans.


So RAR is an indicator of loan returns whilst XIRR is an indicator of investment return.


I don't know if that makes sense or not?
Yes, makes perfect sense. I still think that if both are calculated correctly, then the end result should be similar. I wonder if Harmoney correctly takes a weighted average of the individual RAR for each loan in calculating our RAR or just a simple average which will give an incorrect result. A simple average will only yield a correct result for those investors who invest the same number of notes into all their loans.

I suspect our RAR is a simple average.

On second thoughts, RAR does not take into account time value of money as completely as XIRR. For example: say you lent $1000 at 20%. At the end of 1 year, you get $200 interest. Based on HM's formula, your RAR is the same at that one year point in time whether your interest was received monthly on time or just at the end of the 12 months. AND if the borrow decides to pay off half the loan early, the RAR also do not take into account the time value of the early repayment.

So you are right!! RAR is definitely not XIRR.

[AndrewD]

Yes, I wonder if there is any investor here who had been in for more than 24 months and with a RAR of 15+%

I stuck a toe in in February 2015, laughably tentatively, waiting until that November before deciding their platform worked well enough to start growing it a bit. Actually the platform was a bit rough back then, with some very peculiar discrepancies in the dashboard, but they always sorted themselves out eventually and I looked at the few cents of fees they were getting from me, and didn't complain.

Even now my pile is a fifth of what some of you chap(ette)s have on the table so perhaps I do not qualify as someone who has been in it, really, for 24 months. I had so few loans back then that my RAR graph is a seismograph, good only for laughs. With the increasing number of loans it has stabilised, and since March this year (when either I grew a brain, or the Christmas defaults slowed, or both), is has been rising steadily, now around 15.5%.

I attribute the improvement to bonehead investing decisions that kept it low earlier on. Pretty confident about that. Less confident about attributing the decent RAR nowadays: maybe to being really picky.

Is 15% that good, though? There are plenty of investors on the RAR by loan count chart over 15%. As far as I can see: I can't find the high-res version of that atm.

[myles]

]or the Christmas defaults slowed
Timely reminder, for those that believe - from October through to January would be a good time to be more 'picky' on loans to lower the likely default rate post Christmas.

15% is good long term - average retail is running at 13.2%, so that means there are a lot doing much worse.

[Cool Bear]

I stuck a toe in in February 2015, laughably tentatively, waiting until that November before deciding their platform worked well enough to start growing it a bit. Actually the platform was a bit rough back then, with some very peculiar discrepancies in the dashboard, but they always sorted themselves out eventually and I looked at the few cents of fees they were getting from me, and didn't complain.

Even now my pile is a fifth of what some of you chap(ette)s have on the table so perhaps I do not qualify as someone who has been in it, really, for 24 months. I had so few loans back then that my RAR graph is a seismograph, good only for laughs. With the increasing number of loans it has stabilised, and since March this year (when either I grew a brain, or the Christmas defaults slowed, or both), is has been rising steadily, now around 15.5%.

I attribute the improvement to bonehead investing decisions that kept it low earlier on. Pretty confident about that. Less confident about attributing the decent RAR nowadays: maybe to being really picky.

Is 15% that good, though? There are plenty of investors on the RAR by loan count chart over 15%. As far as I can see: I can't find the high-res version of that atm.
Yes, despite all the shortcomings of the RAR, anyone with over 15% RAR after 24 months is doing very well indeed!! Will beat a lot of other investments too including many in the share and housing markets.

[alistar_mid]

Most losses are in E and F. I stopped investing in those grades a while ago, but there were plenty of loans in those grades.
The spread is about:
A = 4% (only invested in A right at the beginning and don't now because I don't want to drag the average down)
B = 20% (only invest in B5 now as I don't want to drag the average down)
C = 40%
D = 23% (don't invest in anything D3 or above now because those are the loans that failed most frequently)
E = 10%
F = 3% (haven't put anything in F grade for about 6 months; it was twice this)




I've got $77k in Harmoney and $19k in LC. I'm aiming to level them out a bit to spread the risk. I only invest in B1 and B2 in LC, but it's tricky to get into the loans because they go really quickly. I put $150 in each one. No losses so far. I do have a few A-grade loans from right at the beginning dragging the average down.

I'm actually thinking of pulling more money out in the medium term (e.g. next 12 months) because people are starting to hate property which means there will be some deals.

Re the other post about investment split, I don't have Lego, but I do have a 1985 Skyway Streetbeat BMX in condition 9.5/10 worth about $3k :) Those things are rare in mint condition. I'm looking for old synthesizers, but I think I've missed the boat on that one. Plus, I have a couple of ounces of gold. I did have 80kg of silver but sold that once it had peaked and was on its way down. That paid off my mortgage.

i regards to harmoney, yeah same, most of mine (all but 1 think) have been from grade E&F loans, they looked good with high interest rates and lowish default rates, but they just seem to default too much although in saying tat I haven't looked at detailed ROI on them.

IN regards to the lego, well its still cool and I like it, but even still buying it as an investment, even if you get like a -30% sale at the wharehouse, by the time you trademe it a few years down the line when that set is discontinued.. and you have to do the auction, then take it to nz post bubble wrap it etc... is it all worth it lol

Esp when the rest of your portfolio is in the 7 figures and can have pretty decent fluctuations and you are dealing in a $60 lego set you brought for $40 and waited for 2 years and sold for $80 lmao

[darrenc]

IN regards to the lego, well its still cool and I like it, but even still buying it as an investment, even if you get like a -30% sale at the wharehouse, by the time you trademe it a few years down the line when that set is discontinued.. and you have to do the auction, then take it to nz post bubble wrap it etc... is it all worth it lol

Esp when the rest of your portfolio is in the 7 figures and can have pretty decent fluctuations and you are dealing in a $60 lego set you brought for $40 and waited for 2 years and sold for $80 lmao

Yeah, but if you'd bought the original Lego Millenium Falcon...http://www.ebay.com/itm/Lego-Star-Wars-UCS-Millenium-Falcon-First-Edition-10179-/122713387707?epid=70327387&hash=item1c9249b2bb:g:ltEAAOSwRr5ZtgGf

[leesal]

Yes, despite all the shortcomings of the RAR, anyone with over 15% RAR after 24 months is doing very well indeed!! Will beat a lot of other investments too including many in the share and housing markets.

You early adopters got in at the right time!

I missed the party, and joined just as 1.5 kicked in :(

15% will be very challenging to achieve.

[Investor]

You early adopters got in at the right time!

I missed the party, and joined just as 1.5 kicked in :(

15% will be very challenging to achieve.

Yes, based on the latest scorecard an optimal RAR after projected defaults is going to be around 14% (roughly).

[RMJH]

Yes, based on the latest scorecard an optimal RAR after projected defaults is going to be around 14% (roughly).
What is your definition of optimal?

[Investor]

What is your definition of optimal?

Meaning if you could invest all of your capital at the most desirable grade or grade range.

[RMJH]

Meaning if you could invest all of your capital at the most desirable grade or grade range.
So you mean the highest expected achievable return on a portfolio rather than a more complex optimisation considering risk.

[Investor]

So you mean the highest expected achievable return on a portfolio rather than a more complex optimisation considering risk.

Yes. My statement was fairly vague. I don't have the time at present to explain my estimate and it was nothing more than an estimate so take it as you will.

[myles]

For interest only based on the new (1.5) interest rates and default rates supplied by Harmoney (no guarantee that it is correct):

The below percentages are Annualised Rate of Return based on 1000 loans of $100 each (all invested at the same start time) for a period of 3 years (so fees are 15%).




1
2
3
4
5


A
5.15%
5.87%
6.61%
7.36%
8.11%


B
9.24%
9.99%
10.73%
11.09%
11.43%


C
12.14%
12.84%
13.14%
13.79%
14.01%


D
14.57%
15.08%
15.14%
15.17%
15.16%


E
15.45%
15.63%
15.53%
15.37%
15.20%


F
15.02%
14.82%
14.66%
14.51%
14.10%



Things to note:

* The above is calculated on a 3 year fixed term for all loans. Clearly many loans are paid off early and since more interest is paid early in a loan this would increase the return.
* Defaults are applied at the same rate every month across the full term - the new Hazard curve shows defaults having a more equal spread and since they are applied equally from the first month, I think it a reasonable approach to get a reasonable representation of default losses.
* Selection of 'better' loans based on even very basic criteria should increase the return.
* There are many small variations that can affect returns, so the above cannot be used as a generalisation of loan returns.

The calculation was done by first determining the annualised rate of return without reinvestment. This rate was then applied to the returns (i.e. principal + interest - fees) for the relevant term remaining (so reinvestment of all returns), with additional defaults applied, resulting in a value that should reflect the full investment return for the full term.

It would be great if someone else wanted to run similar numbers and see if they get similar results...as I think the full return on returns may still not be fully accounted for by the method I've used...

[myles]

The matching default table for the previous table:




1
2
3
4
5


A
2.3
4.7
5.2
5.7
6.7


B
7.7
8.6
10.1
12.1
14.5


C
18.0
22.4
27.3
34.7
43.4


D
55.6
70.2
87.5
106.0
126.6


E
151.0
177.9
208.6
240.5
272.7


F
304.6
336.4
365.6
393.9
421.4



This shows the total number of defaults expected over the full 3 year period if only the individual grade was selected to achieve the return shown in the previous table - might be enlightening for some! 1000 initial loans, but many more loans are invested in over the 3 year period as principal and interest is returned, more than 2000 loans by the end of year 3.

Note that these defaults are not for the full $100 of each loan, but only the value of principal left when the default occurs.

So as an example: if only E1 loans were invested in (initially 1000 loans of equal value), over 3 years of reinvesting the returns, you should expect 151 defaults, but should achieve a 15.45% return pa. (151 defaults would have a total value of around $7550 assuming $100 invested in each loan)

BOTH OF THE ABOVE TABLES IGNORE TAX!!!

[RMJH]

Good work Myles. Kinda confirms my highly unscientific instincts to stick to B.C.D's but also indicates might not be worth going beyond D2 though in practice supply is limited so you get what you can to some extent. Would be really interested to have the standard deviations for the default rate estimates from Harmoney. Could flex the default rates +/- 50% (though suspect more downside than upside at this point in the cycle)and see what returns that yields...

[Cool Bear]

Thanks Myles! That is a lot of work. Thanks for sharing.

[Cool Bear]

Good work Myles. Kinda confirms my highly unscientific instincts to stick to B.C.D's but also indicates might not be worth going beyond D2 though in practice supply is limited so you get what you can to some extent. Would be really interested to have the standard deviations for the default rate estimates from Harmoney. Could flex the default rates +/- 50% (though suspect more downside than upside at this point in the cycle)and see what returns that yields...
No. The second default table is already included in the first annual rate of return table. So if Harmoney's estimates are correct, it is still better to invest in the more risky D to F as the returns are in the 14 to 15%. However, Myles' working is based on an even spread of defaults. So the actuals will be a bit different.

[Cool Bear]

One issue often missed in the discussion on defaults is the effect of arrears. A loan may be written off after 10 months. One will then assume that the borrower had been paying for the last 8 to 10 months. But often, they may only paid 2 out of the 10 months or maybe even not at all. So, effectively the loan was in default from the month the borrower stop paying. I assume that Harmoney's stats (and hazard curve) are based on when the loans are written off and not the "effective" default dates.

[Cool Bear]

One issue often missed in the discussion on defaults is the effect of arrears. A loan may be written off after 10 months. One will then assume that the borrower had been paying for the last 8 to 10 months. But often, they may only paid 2 out of the 10 months or maybe even not at all. So, effectively the loan was in default from the month the borrower stop paying. I assume that Harmoney's stats (and hazard curve) are based on when the loans are written off and not the "effective" default dates.
Harmoney usually write off loans well after 3 months of the last payment.

Say someone had a loan in January and made a payment in February, then another in May, missing March and April. Then no payment until HM write off the loan in September. So from loan to writeoff is 8 or 9 months and that is probably reflected as such on their hazard curve.

However, for our returns calculation, the loan is effectively written off after 2 months (of payments).

[myles]

I assume that Harmoney's stats (and hazard curve) are based on when the loans are written off and not the "effective" default dates.
The Hazard Curve shows a non-zero value for months 1 - 3 so perhaps it is the first non payment date?

[RMJH]

No. The second default table is already included in the first annual rate of return table. So if Harmoney's estimates are correct, it is still better to invest in the more risky D to F as the returns are in the 14 to 15%. However, Myles' working is based on an even spread of defaults. So the actuals will be a bit different.
Yeah but, the variability of returns (ie risk) goes up as the grade increases. An expected return of 15% on a D grade is better than 15% on a E grade, you need a higher return to compensate for the higher risk. There's a difference between maximising and optimising return. Harmoney's pricing of loans should take this into account but to me feels, admittedly from a position of relative ignorance, under-cooked at the lower and upper ranges.

[Cool Bear]

The Hazard Curve shows a non-zero value for months 1 - 3 so perhaps it is the first non payment date?
Yes, look at their Static Loss chart in the market stats. They start writing off after 3 to 5 months. They did state somewhere that it is usually 90 to 120 days after the last payment is received. But my point is if the borrower did not make any payment at all before the loan is written off, it is the same to us as being written off immediately on day one in our calculation of returns.

[myles]

look at their Static Loss chart in the market stats.
Yep, I think the way Harmoney show it is appropriate. Static Loss chart - loans aren't a loss, until they are written off. Hazard Curve - when defaults occur i.e. first non-payment.

The way I applied defaults in those previous tables (evenly distributed), would result in a Hazard Curve with a straight line across all 32 months at 3.125%, which, with the higher initial defaults with my method, would, I think, have a similar end result to the supplied Hazard Curve.

[whitt]

After looking at Myles RAR data I am happy now with my 14% and the auto lend grades I have chosen.

It looks like I am on the right track.
Thanks

[Investor]

After looking at Myles RAR data I am happy now with my 14% and the auto lend grades I have chosen.

It looks like I am on the right track.
Thanks

You certainly are!