Harmoney

[kiwi_on_OE]

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.

I think this highlights one point that doesn't get much discussion. When the economy performs worse, I expect there to be more defaults. One could argue that the default rates used now are from a fairly good economic environment. What will happen to the default rates when the economy turns down? No change? Double? Triple? Does Harmoney have any experience in those circumstances? At that point I'd rather have a loan being paid anything, even an A1 getting 5%, than a loan written-off.

[myles]

There has been a fair bit of discussion around this if you go back aways - details of what happened overseas is included, the suggested outcome was that P2P fared better than most other investment options in a downturn. P2P had only just begun when things went to custard, so if/when it happens again there will be more to learn I think.

[Investor]

There has been a fair bit of discussion around this if you go back aways - details of what happened overseas is included, the suggested outcome was that P2P fared better than most other investment options in a downturn. P2P had only just begun when things went to custard, so if/when it happens again there will be more to learn I think.

Here's a link to the data on it - lending club's loan performance from 2007-2009 https://cdn4.ijstatic.com/wp-content/uploads/2016/08/loan-performance.png

Every grade still made a positive return.

As long as you are well diversified (have 200+ loans, hopefully a lot more if you have a significant amount of capital invested) you should be fine.

[Cool Bear]

got my first principal waived for payment protect. Lost a small amount of $1.42 to principal waived. Overall still satisfied with Payment Protect as I reckon it will increase my total returns by another 1% to 1.5%, assuming that this is not the start of a wave of "principal waived" to come.

[RMJH]

Here's a link to the data on it - lending club's loan performance from 2007-2009 https://cdn4.ijstatic.com/wp-content/uploads/2016/08/loan-performance.png

Every grade still made a positive return.

As long as you are well diversified (have 200+ loans, hopefully a lot more if you have a significant amount of capital invested) you should be fine.
Interesting though that the lowest interest rate loans gave the highest return (just)! Still think that there is a little too much focus here on chasing highest return. We are in a period of very low write-offs but that could change. I just got a warning from ZOPA to expect lower returns as writeoffs have been historically low in the last few years but are on the turn. That relates the the UK of course.

[darrenc]

Interesting though that the lowest interest rate loans gave the highest return (just)! Still think that there is a little too much focus here on chasing highest return. We are in a period of very low write-offs but that could change. I just got a warning from ZOPA to expect lower returns as writeoffs have been historically low in the last few years but are on the turn. That relates the the UK of course.

Agreed. I've stopped taking anything riskier than a D2 and I'm being more discerning about all loans. Consequently I'm struggling to get all the money out when putting only $75 in per loan and constantly have about $1000 in the kitty (out of $75k invested). My average nett return is 8.2%pa over 1.75 years, including the 3 months it took me to get all the money invested. This is after write-offs, Harmoney fees and tax. Hopefully I'll be able to maintain it, but it's already trending down from almost 17% gross as the best month to 15% now (figures reported by Harmoney).

[Investor]

Interesting though that the lowest interest rate loans gave the highest return (just)! Still think that there is a little too much focus here on chasing highest return. We are in a period of very low write-offs but that could change. I just got a warning from ZOPA to expect lower returns as writeoffs have been historically low in the last few years but are on the turn. That relates the the UK of course.

You may be correct. I personally stayed away from the higher interest grades as I didn't want to lend money at loan shark rates. My RAR is only 11.80%, now I'm only investing in C1-C5 and am hoping to eventually get my RAR up to over 13%

[joker]

Anyone else noticed that Harmoney's gone very quiet? Not many loans coming through ATM.

[Soolaimon]

Anyone else noticed that Harmoney's gone very quiet? Not many loans coming through ATM.

Plenty of advertising on tv but nothing happening on the platform for me last 3 days ?????

[Art]

Interest $13,352
Charged-off $2,158
Recoveries $7

I accept there are going to be lots of charged off loans, but I thought I had read somewhere (probably about 2 years ago when I started investing) that loans were charged off when there was only a 30% chance of collection. Surely that would mean that there should be a constant trickle of recoveries coming in and I could expect, over time, 30% to be recovered. Overall I have no complaints about the return on investment, but I do wonder whether there could be a little more effort in collections after loans have been charged off to enhance returns further.

[Saamee]

Plenty of advertising on tv but nothing happening on the platform for me last 3 days ?????

It's been both the Last few days of the Month & the Quarter.... Always goes quieter around then :)

Will bounce back soon.

[whitt]

Xmas is looming.
I am contemplating temporarily tightening up my Auto lend criteria for Nov/Dec as i was assuming some people could get into debt more easily during this period.
However when I look at stats I cant find any p2p data in my Dashboard which would suggest this so I might end up leaving my Auto lend rules untouched.

If I go into my dashboard and check arrears I can see a couple from 2016 December but they are A and B grades, I would have expected to see a spike of arrears if true.

Do any of the bigger investors here see a high spike for loans started in the December periods? Maybe my data set is too small or my logic is wrong

[joker]

Seems to be something wrong with Harmoney investor website. Loan grade data is missing from my list of loans funded. All there for loans issued today but missing for most loans issued prior to today. A cock-up with the IT department?

[Investor]

Xmas is looming.
I am contemplating temporarily tightening up my Auto lend criteria for Nov/Dec as i was assuming some people could get into debt more easily during this period.
However when I look at stats I cant find any p2p data in my Dashboard which would suggest this so I might end up leaving my Auto lend rules untouched.

If I go into my dashboard and check arrears I can see a couple from 2016 December but they are A and B grades, I would have expected to see a spike of arrears if true.

Do any of the bigger investors here see a high spike for loans started in the December periods? Maybe my data set is too small or my logic is wrong

It quietened down last year around December if I recall correctly.

[777]

Another one appears

http://moolainvest.co.nz

[myles]

Another one appears

http://moolainvest.co.nz

They truly are scary. See what fees/interest they charge: https://www.moola.co.nz/

$1000 for 4 weeks => Fees and Interest = $269.92

Hmmm, that works out at...351% pa !!!

I guess if you are desperate for a short term loan, but ... words fail me ...

[Investor]

Yes it is quite astonishing to see. The business is clearly a loan shark. I'm amazed they received an award from Deloitte despite being involved in a highly unethical area of the finance industry.

[joker]

Another one appears

http://moolainvest.co.nz

They appear to be seeking to borrow investment capital (debt not equity), minimum $50,000 for 1 - 3 years returning 8%-12% p.a. Unless there's some upside in the form of equity or a bonus at the end, Harmoney's $25 loan fractions look to have a better return and less risk.

[CageyB]

They appear to be seeking to borrow investment capital (debt not equity), minimum $50,000 for 1 - 3 years returning 8%-12% p.a. Unless there's some upside in the form of equity or a bonus at the end, Harmoney's $25 loan fractions look to have a better return and less risk.

Rates like that are usually referred to as "points" and the default process "crowbars". 351% p.a. is morally repugnant. Payday loan sharks accessible by phone app are a disaster waiting to happen.

[darrenc]

I wonder whether 'payment protect' is misleading people with literacy issues into believing there are no consequences for not paying back the loan. NZ has about 40% of people defined as having literacy issues with 20.7% of people having level 1 literacy (this means they struggle to read and understand simple sentences). I would imagine, given the creative spelling of the majority of the reasons for the loans, that the proportion of people with literacy issues taking out Harmoney loans is quite a lot more than the average.

Since Oct 15 last year, 9 months after payment protect was launched, 8 of 13 of my charged off loans have payment protect, and I didn't typically invest in that many payment protect loans. "Payment protect" sounds like they are protected from consequences and, in a way, they are. The description is here: https://www.harmoney.co.nz/payment-protect/borrowers It covers terminal illness, which many people get, and your remaining loan payments are waived.

I've stopped investing in loans that have payment protect as my earnings from the protect rebates are $45.73 while the losses are $231.50. The recent spate of bad loans has taken my returns from around 17% down to 15% and I've been treading water for 3 months. I've stopped investing in anything over D2 since the rate changes. I'm 40% weighted in C with about 5% in A, 20% in B, 25% in D and 10% in E.

[Investor]

I wonder whether 'payment protect' is misleading people with literacy issues into believing there are no consequences for not paying back the loan. NZ has about 40% of people defined as having literacy issues with 20.7% of people having level 1 literacy (this means they struggle to read and understand simple sentences). I would imagine, given the creative spelling of the majority of the reasons for the loans, that the proportion of people with literacy issues taking out Harmoney loans is quite a lot more than the average.

Since Oct 15 last year, 9 months after payment protect was launched, 8 of 13 of my charged off loans have payment protect, and I didn't typically invest in that many payment protect loans. "Payment protect" sounds like they are protected from consequences and, in a way, they are. The description is here: https://www.harmoney.co.nz/payment-protect/borrowers It covers terminal illness, which many people get, and your remaining loan payments are waived.

I've stopped investing in loans that have payment protect as my earnings from the protect rebates are $45.73 while the losses are $231.50. The recent spate of bad loans has taken my returns from around 17% down to 15% and I've been treading water for 3 months. I've stopped investing in anything over D2 since the rate changes. I'm 40% weighted in C with about 5% in A, 20% in B, 25% in D and 10% in E.

I agree that payment protect loans are best avoided. I have chosen to invest in them for the time being due to a lack in the supply of loans.

[Art]

I wonder whether 'payment protect' is misleading people with literacy issues into believing there are no consequences for not paying back the loan. NZ has about 40% of people defined as having literacy issues with 20.7% of people having level 1 literacy (this means they struggle to read and understand simple sentences). I would imagine, given the creative spelling of the majority of the reasons for the loans, that the proportion of people with literacy issues taking out Harmoney loans is quite a lot more than the average.

Since Oct 15 last year, 9 months after payment protect was launched, 8 of 13 of my charged off loans have payment protect, and I didn't typically invest in that many payment protect loans. "Payment protect" sounds like they are protected from consequences and, in a way, they are. The description is here: https://www.harmoney.co.nz/payment-protect/borrowers It covers terminal illness, which many people get, and your remaining loan payments are waived.

I've stopped investing in loans that have payment protect as my earnings from the protect rebates are $45.73 while the losses are $231.50. The recent spate of bad loans has taken my returns from around 17% down to 15% and I've been treading water for 3 months. I've stopped investing in anything over D2 since the rate changes. I'm 40% weighted in C with about 5% in A, 20% in B, 25% in D and 10% in E.

I don't get the same correlation. 10 of my 90 charged off loans (11.11%) had payment protect. 623 of my 4123 all time investments (15.11%) were payment protect loans.

[Saamee]

Anyone else noticed that Harmoney's gone very quiet? Not many loans coming through ATM.

Don't have kidz at home anymore....

Just realized it's the 1st week of school holidays

It's quiet at Squirrel and Lending Crowd too.

Many Borrowing age parents away on holiday ( thanks to P2P loans already obtained? )

[Investor]

I disagree - Harmoney isn't that quiet. Seems to be averaging $600k+ per day still. I see plenty of loans each day.

[joker]

I disagree - Harmoney isn't that quiet. Seems to be averaging $600k+ per day still. I see plenty of loans each day.

I was getting invested in 14 -18 loans per day now I'm struggling to get 10 despite increasing my auto-lend range. Went quiet in late Sept and hasn't recovered. There used to be big blocks of loan listings at 8am, noon and 6pm but not so much now. Also seem to be a lot of payment protect loans that I'm not keen to do. Can't understand why some of these people buy payment protect to be honest. Just a bigger millstone around their neck.

[humvee]

Yes, I wonder if there is any investor here who had been in for more than 24 months and with a RAR of 15+%
Im at around 30 months - Signed up end of Jan 2015
and im at 15.69%
9222
9223

[permutation]

Payment-Protect: Of the 1400 all-time loans over 31 months, 195 were PP. Started Oct 9 2016. Of these loans, 25% have been repaid.

Have had 3 charged off and currently have 3 in arrears.

I continue to invest in PP because over time, my RAR will be enhanced.

My Charged off amount has been reduced by 50% in $value by the effect of the current PP balance.

[whitt]

Is Auto invest working at present?
Previous weeks it was picking up loans for me but since 23 sept it seems to not have got any.
My ratio is improving each day as funds available is climbing so that cant be the issue. There appears to still be plenty of loans coming into marketplace too

[permutation]

I put $2500 in on Thursday and got one $50 unit on Friday.

It is working, but I have really fine tuned criteria for Auto-Lend within a limited grade band, so I don't expect to get that many.

When I invest manually I relax my criteria more and use my, gut feeling, about borrowers so to speak; so I do get a few that way.

My RAR has slipped slightly last week to 14.43% due to 4 Charge-offs in the last month. I expect it to pick up again though.

[permutation]

Im at around 30 months - Signed up end of Jan 2015
and im at 15.69%
9222
9223


Well done Humvee, 15.69% is a great RAR. I can see the good result is because you start from C Grade and upward.

I'm wondering through my experience over a similar time frame , whether your E and F grades will have some negative effect on your RAR through defaults.

Analyzing your 2nd graph, your RAR has been slowly descending, or do you think, you have by now flushed out all the bad E,F's?:)

[joker]

Im at around 30 months - Signed up end of Jan 2015
and im at 15.69%
9222
9223

Congratulations, an excellent RAR humvee. Most of your loans will be at scorecard 1.0 interest rates rather than the new (and lower) scorecard 1.5 interest rates. The interest rate reductions particularly affect E and F grade loans. The offset is meant to be less charge-offs so it will be a good acid test to compare in say 2 - 3 years time to see if Harmoney's risk/return profile is correct or in fact lenders have taken a drop in returns as a result of the change from scorecard 1.0 to 1.5 (assuming your investment criteria/loan mix remain the same).

[Cool Bear]

Im at around 30 months - Signed up end of Jan 2015
and im at 15.69%
9222
9223
Thanks for sharing, Humvee. 15.69% per year is a fantastic return for any investment.

[hardt]

Im at around 30 months - Signed up end of Jan 2015
and im at 15.69%
9222
9223

Solid return, wonder if it would not be beneficial to stop funding F loans entirely and focus on C-E.

How many loans have been written off?

[humvee]

Well done Humvee, 15.69% is a great RAR. I can see the good result is because you start from C Grade and upward.

I'm wondering through my experience over a similar time frame , whether your E and F grades will have some negative effect on your RAR through defaults.

Analyzing your 2nd graph, your RAR has been slowly descending, or do you think, you have by now flushed out all the bad E,F's?:)


A Reduction in E & F loans has generally resulted in a reduction in RAR I have attached my graph from june 2016. Most of the shift in grade balance has just happened rather then anything I have tried to do, my autolend rules include F1-F4 grades but many of these f grades loans would be blocked by other rules like income to repayment ratio, home status, time in job etc, so most F grades are manual lends - and increase in autolend volume has diluted the F grade ratio.





9225

[humvee]

Hmmm ... Both harmoney and lending crowd down currently, Lending crowd has sent out an email, No word from harmoney

9229

[Investor]

Hmmm ... Both harmoney and lending crowd down currently, Lending crowd has sent out an email, No word from harmoney

9229

Harmoney is back up.

[alistar_mid]

Interest $13,352
Charged-off $2,158
Recoveries $7




lol

for me:
Interest $14,066
Charged-off $2,425
Recoveries $3

been in just over year (in total), with $50k deployed aug 16 - dec 16, and the another $50k jan 17 - mar 17.

[permutation]

What's going on with the platform!? They've had only two $40k loans listed since yesterday that don't seem to be taken up very fast, and nothing else.??

I can't believe in a country of 4.4 million people that this is all we get.

Has anyone else noticed that loading any data on the site has become very slow in the last couple of days?

[joker]

What's going on with the platform!? They've had only two $40k loans listed since yesterday that don't seem to be taken up very fast, and nothing else.??

I can't believe in a country of 4.4 million people that this is all we get.

Has anyone else noticed that loading any data on the site has become very slow in the last couple of days?

Yes - Harmoney has turned to custard. Very slow loading, very few loans for the last week but plenty today. Only problem is that everytime today I hit the 'Confirm Order' button to invest it fires back 'THERE WAS AN ERROR' and I'm not invested. Never thought it could be so hard to give money away!

[Art]

Yes - Harmoney has turned to custard. Very slow loading, very few loans for the last week but plenty today. Only problem is that everytime today I hit the 'Confirm Order' button to invest it fires back 'THERE WAS AN ERROR' and I'm not invested. Never thought it could be so hard to give money away!

Ditto - glad I am not the only one with this problem.

[777]

The site was closed for a while stating they were doing some maintenance.

[joker]

The site was closed for a while stating they were doing some maintenance.

Well all they've managed to do is stuff the whole site. Harmoney's tech gurus need some upskilling.

[Soolaimon]

Well all they've managed to do is stuff the whole site. Harmoney's tech gurus need some upskilling.

Going ok now. 12 loans up

[Art]

Going ok now. 12 loans up

Yes, going now - just. Still as slow as a week of wet Sundays.

[joker]

Harmoney retail RAR has been trending down for sometime now. Currently 13.07% (lowest since mid-2015) and heading toward the 12s. Scorecard 1.5 starting to bite?
9234

[darrenc]

Harmoney retail RAR has been trending down for sometime now. Currently 13.07% (lowest since mid-2015) and heading toward the 12s. Scorecard 1.5 starting to bite?
9234 I'm down from high 16s to 14.99% this morning. It's taken 2 months to drop that quickly. That's over 2600 loans and 21 months. I'm weighted mostly in Cs and Ds. I get the feeling we're making hay while the sun shines. These kinds of returns will attract competition wanting to undercut them because investors are accepting 2.5% in the bank or on rental properties. O/seas returns in these sorts of investments are not as good as they are here.

[Investor]

I'm down from high 16s to 14.99% this morning. It's taken 2 months to drop that quickly. That's over 2600 loans and 21 months. I'm weighted mostly in Cs and Ds. I get the feeling we're making hay while the sun shines. These kinds of returns will attract competition wanting to undercut them because investors are accepting 2.5% in the bank or on rental properties. O/seas returns in these sorts of investments are not as good as they are here.

Your RAR of over 16% wasn't going to last long term. You're now at a more realistic RAR for your risk mix & time of investment.

[bullfrog]

IMO the only way you can work out your actual growth is get your balance one year ago and compare it with today's balance. Of course you'll need to add up funding available, in funding and outstanding principle but if you do, I think you may be shocked by your actual growth, mine is about 7.5% compared with a RAR of almost 16%. DYOR

[darrenc]

IMO the only way you can work out your actual growth is get your balance one year ago and compare it with today's balance. Of course you'll need to add up funding available, in funding and outstanding principle but if you do, I think you may be shocked by your actual growth, mine is about 7.5% compared with a RAR of almost 16%. DYOR

Mine is 8.9%

[joker]

Mine is 8.9%

Harmoney's RAR formula looks to be reasonably sound but doesn't seem to allow for the "dead time" between the time the borrower pays Harmoney and when Harmoney credits the money to your account. Also, it's not the whole difference, but the figures you've calculated are after tax but Harmoney's RAR figure is before tax.

[myles]

I'm currently at 7.6% return for 6 months i.e. ~ 15.2% for 12 months after tax (lowest rate). This includes a startup period of a little over 3 months to invest $100K (so it should improve). I know I've got some significant losses to come as more defaults kick in but my returns are looking to be significantly higher... XIRR at just under 18% (after tax) - very consistently, current RAR at 17.35%pa. Compounding with the lower tax rate makes a significant difference to the overall returns.

If you are investing new money or drawing on returns a simple balance comparison will not give you an accurate picture of your returns (using XIRR will).

[RMJH]

Harmoney retail RAR has been trending down for sometime now. Currently 13.07% (lowest since mid-2015) and heading toward the 12s. Scorecard 1.5 starting to bite?
9234
Maybe but also the continued dilution of the original (capital based fee) loans will hit retail returns. My returns have dropped a little under 0.5% even though I no longer invest in A's.

[RMJH]

Also writeoffs as a % of interest are creeping up (for me) and it is too early for this to be from recent shift in grade mix.

[myles]

An increase to the minimum wage from the incoming Govt. may improve existing borrowers ability to pay off debt, perhaps reducing defaults?

Anyone see any major positive/negatives for P2P Lending from the incoming Govt.?

Does a falling NZD effect P2P lending? (More expensive to purchase from OS so perhaps local small businesses could do better - some are P2P borrowers).

[RMJH]

https://ci5.googleusercontent.com/proxy/TYtwErn0Z1T3omoBSHxrE2jwy1JeC1Jx3v6TAetIu73N3hdFjW Hnj72WS-4RjAFNXMBTt3yz0RjwmI8YN9gMvqJRbPSjBbSeNjo7T7gg0IVn XyFrSYQ9xmtrp4ozE6l6zdNgM8bqx918L83vUk9S-tGf8TRnTLbZ7dt5UtD9BRxAIQ=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B11d13c90-ce2c-48c1-8dc4-0f50e0c5f14b%7D_spacer.png


This from Zopa relates to UK but found it interesting all the same.

Update on Zopa investing


https://ci5.googleusercontent.com/proxy/TYtwErn0Z1T3omoBSHxrE2jwy1JeC1Jx3v6TAetIu73N3hdFjW Hnj72WS-4RjAFNXMBTt3yz0RjwmI8YN9gMvqJRbPSjBbSeNjo7T7gg0IVn XyFrSYQ9xmtrp4ozE6l6zdNgM8bqx918L83vUk9S-tGf8TRnTLbZ7dt5UtD9BRxAIQ=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B11d13c90-ce2c-48c1-8dc4-0f50e0c5f14b%7D_spacer.png


Since 2010 the UK has seen continually improving consumer credit performance leading to historically low levels of bad debt.
In early 2016, we at Zopa started to see some early signs of a possible change in this trend. It now looks like the change is real:









https://ci5.googleusercontent.com/proxy/db1-eVONJiK_TvSfUWo8MsYQkDtdMXM_TPejABP9V4hiruG0shi-M5iS9gaPVBKfhIfO--cKJA57jWH5KpcevsR_nfB4gnwaSLy-9l1viYeg7qnqLcGVjYavCCW9Iel94a3UrTpTvJy8vWZIM3RcV2 ka52qFP9FVJ_3NxbmVWGMbcg=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B3be62f3c-63f0-4506-89e7-7725a0bc23fa%7D_bullet.png
https://ci5.googleusercontent.com/proxy/TYtwErn0Z1T3omoBSHxrE2jwy1JeC1Jx3v6TAetIu73N3hdFjW Hnj72WS-4RjAFNXMBTt3yz0RjwmI8YN9gMvqJRbPSjBbSeNjo7T7gg0IVn XyFrSYQ9xmtrp4ozE6l6zdNgM8bqx918L83vUk9S-tGf8TRnTLbZ7dt5UtD9BRxAIQ=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B11d13c90-ce2c-48c1-8dc4-0f50e0c5f14b%7D_spacer.png
Publicly available data suggests consumer default and insolvency levels are reaching levels which are more consistent with historic norms prior to 2010; and



https://ci5.googleusercontent.com/proxy/TYtwErn0Z1T3omoBSHxrE2jwy1JeC1Jx3v6TAetIu73N3hdFjW Hnj72WS-4RjAFNXMBTt3yz0RjwmI8YN9gMvqJRbPSjBbSeNjo7T7gg0IVn XyFrSYQ9xmtrp4ozE6l6zdNgM8bqx918L83vUk9S-tGf8TRnTLbZ7dt5UtD9BRxAIQ=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B11d13c90-ce2c-48c1-8dc4-0f50e0c5f14b%7D_spacer.png


https://ci5.googleusercontent.com/proxy/db1-eVONJiK_TvSfUWo8MsYQkDtdMXM_TPejABP9V4hiruG0shi-M5iS9gaPVBKfhIfO--cKJA57jWH5KpcevsR_nfB4gnwaSLy-9l1viYeg7qnqLcGVjYavCCW9Iel94a3UrTpTvJy8vWZIM3RcV2 ka52qFP9FVJ_3NxbmVWGMbcg=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B3be62f3c-63f0-4506-89e7-7725a0bc23fa%7D_bullet.png
https://ci5.googleusercontent.com/proxy/TYtwErn0Z1T3omoBSHxrE2jwy1JeC1Jx3v6TAetIu73N3hdFjW Hnj72WS-4RjAFNXMBTt3yz0RjwmI8YN9gMvqJRbPSjBbSeNjo7T7gg0IVn XyFrSYQ9xmtrp4ozE6l6zdNgM8bqx918L83vUk9S-tGf8TRnTLbZ7dt5UtD9BRxAIQ=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B11d13c90-ce2c-48c1-8dc4-0f50e0c5f14b%7D_spacer.png
The Bank of England in their credit conditions survey stated “Lenders reported that default rates on both credit cards and other unsecured lending to households were reported to have increased significantly in Q2 [of 2017].”



https://ci5.googleusercontent.com/proxy/TYtwErn0Z1T3omoBSHxrE2jwy1JeC1Jx3v6TAetIu73N3hdFjW Hnj72WS-4RjAFNXMBTt3yz0RjwmI8YN9gMvqJRbPSjBbSeNjo7T7gg0IVn XyFrSYQ9xmtrp4ozE6l6zdNgM8bqx918L83vUk9S-tGf8TRnTLbZ7dt5UtD9BRxAIQ=s0-d-e1-ft#http://img06.en25.com/EloquaImages/clients/ZopaLimited/%7B11d13c90-ce2c-48c1-8dc4-0f50e0c5f14b%7D_spacer.png











While we are not immune to this industry-wide trend, the impact on lending at Zopa is limited. This is because we identify and focus on low risk borrowers, we have been cautious in our underwriting in anticipation of increases in default rates, and, since early 2016 in response to very early indications, have been more and more cautious in our lending criteria.

More recently, we have reduced the amount of lending in our higher risk, higher return D-E markets (which are included in the Plus product). We are also taking steps to attract more lower risk customers thus increasing the proportion of A and B rated loans.

What this means for new investments
As a result of the increasing proportion of lower risk, lower return loans we expect to approve, we are expecting a lower targeted return of 4.5% for new investments in Plus. Similarly, the targeted return for new investments in Core will be 3.7% reflecting a shift towards lower risk loans in the A-C markets.
It is important to note that the target average return levels for new investments in each risk market (A–E) have not changed materially. The change in overall return is a result of changes in mix. For example, the proportion of D and E loans in the Plus product would go from 30% until now, to 10-15% in the future.





What this means for existing investments
For existing loans, we are expecting slightly higher losses. For existing investments in Safeguarded loans, we expect no impact on loans as Safeguard coverage is expected to remain above 100% (including future contributions).

In addition to changes in loss expectations, we are also seeing an increase in early repayments from borrowers. While this means that investors get their money earlier, it also reduces interest income and thus returns.

If these trends in early repayment rates and credit losses continue, we would expect that for existing investments in non-Safeguarded loans originated up to August 2017, realised returns will be lower than original expectations: 3.5% compared to 3.9% in Core and 5.6% compared to 6.3% in Plus.

A

[Fisherking]

I'm down from high 16s to 14.99% this morning. It's taken 2 months to drop that quickly. That's over 2600 loans and 21 months. I'm weighted mostly in Cs and Ds. I get the feeling we're making hay while the sun shines. These kinds of returns will attract competition wanting to undercut them because investors are accepting 2.5% in the bank or on rental properties. O/seas returns in these sorts of investments are not as good as they are here.
Really? I think the harmoney returns are absolute rubbish. My property, share and fund investments provide much higher returns. NZ shares over 20% ytd (tax paid).

[whitt]

Really? I think the harmoney returns are absolute rubbish. My property, share and fund investments provide much higher returns. NZ shares over 20% ytd (tax paid).
Although harmoney provides diversification to a portfolio too.

[myles]

Really? I think the harmoney returns are absolute rubbish. My property, share and fund investments provide much higher returns. NZ shares over 20% ytd (tax paid).

What period is the 20% for? Anything less than 10 years for shares is folly: +20% one year -20% the next year...Property even longer. Unless you're in the much riskier game of short term trades/property flipping.

[Fisherking]

What period is the 20% for? Anything less than 10 years for shares is folly: +20% one year -20% the next year...Property even longer. Unless you're in the much riskier game of short term trades/property flipping.

20% is year to date as stated. Last couple of years are similar however i agree it's short term in the scheme of things.
My point was that I don't think the harmoney returns are that great for an unsecured investment, particularly now we have v1.5.

[Fisherking]

Although harmoney provides diversification to a portfolio too.

Yes, excellent diversification.
It will be interesting to see what happens to interest rates over the next year or two now it seems the US are looking to raise rates.

[myles]

20% is year to date as stated. Last couple of years are similar however i agree it's short term in the scheme of things.
My point was that I don't think the harmoney returns are that great for an unsecured investment, particularly now we have v1.5.
Harmoney is returning 18% ytd for me, after tax...

[Fisherking]

Harmoney is returning 18% ytd for me, after tax...

Wow, so your RAR must be ~26%? Well done. To be this high you must be invested in very low grade loans and either got lucky or have not been in for long enough to see the defaults come through - you need a couple of years.

[icyfire]

Wow, so your RAR must be ~26%? Well done. To be this high you must be invested in very low grade loans and either got lucky or have not been in for long enough to see the defaults come through - you need a couple of years.
I agree. Even Smartshares MDZ (http://smartshares.co.nz/types-of-funds/smartmedium/mdz) has been doing better than Harmoney's platform RAR and investing in Smartshares passive funds takes a lot less time. To get anywhere close to 18% RAR on Harmoney you would need to invest in some very high risk (aka s*hitty) loans.
That's just my 5c worth.

[alistar_mid]

I agree. Even Smartshares MDZ (http://smartshares.co.nz/types-of-funds/smartmedium/mdz) has been doing better than Harmoney's platform RAR and investing in Smartshares passive funds takes a lot less time. To get anywhere close to 18% RAR on Harmoney you would need to invest in some very high risk (aka s*hitty) loans.
That's just my 5c worth.

wait til the market turns at smartshares does negative lol
Harmoney from what I modeled would need a catastrophic default rate, like 40% of your portfolio or something

[icyfire]

wait til the market turns at smartshares does negative lol
Harmoney from what I modeled would need a catastrophic default rate, like 40% of your portfolio or something
If Smartshares start going negative then the economy would have to slow down which means people would loose their jobs which will negatively impact Harmoney as well. It's all connected.
The smart thing to do with shares is to not turn a paper loss into a real loss by selling them during a downturn.

Most of the Harmoney loans don't really make logical sense. Why would someone who has a mortgage want to borrow $25k at 15% on Harmoney for Home Improvements when they could top up their existing mortgage at 6%. I see these loans on Harmoney daily. Did the bank turn them down because deemed too high risk? Or are these borrowers just silly?

[alistar_mid]

If Smartshares start going negative then the economy would have to slow down which means people would loose their jobs which will negatively impact Harmoney as well. It's all connected.
The smart thing to do with shares is to not turn a paper loss into a real loss by selling them during a downturn.

Most of the Harmoney loans don't really make logical sense. Why would someone who has a mortgage want to borrow $25k at 15% on Harmoney for Home Improvements when they could top up their existing mortgage at 6%. I see these loans on Harmoney daily. Did the bank turn them down because deemed too high risk? Or are these borrowers just silly?

your'e obv pretty out of touch with the average financial IQ of the average jabroni walking down the street!

and your example is a little off... having your own mortgage etc you probably gonna be on 12-16% if you take a harmoney loan. the 25% are reserved for renting, not long in job, low income that sort of thing

[icyfire]

your'e obv pretty out of touch with the average financial IQ of the average jabroni walking down the street!
Since your financial IQ is so much higher than mine please enlighten us all with your knowledge by explaining yourself. After all, people come on this forum to learn from the smart people like yourself and not just read your insults.


and your example is a little off... having your own mortgage etc you probably gonna be on 12-16% if you take a harmoney loan. the 25% are reserved for renting, not long in job, low income that sort of thing
My example was of an actual loan that was on Harmoney today. And read me question again: "Why would someone who has a mortgage want to borrow $25k at 15% on Harmoney for Home Improvements when they could top up their existing mortgage at 6%?"

[alistar_mid]

Since your financial IQ is so much higher than mine please enlighten us all with your knowledge by explaining yourself. After all, people come on this forum to learn from the smart people like yourself and not just read your insults.


My example was of an actual loan that was on Harmoney today. And read me question again: "Why would someone who has a mortgage want to borrow $25k at 15% on Harmoney for Home Improvements when they could top up their existing mortgage at 6%?"

lmao, I didn't say you or me, I said the average person. No need to get offended cupcake.

Quite often the average person will buy things on HP while having a mortgage they could draw down on or cash to pay for it, will buy things they don't need. Will get cars on finance when they could do it on their mortgage. And... will go and get p2p loans when they could use their mortgage. There could be any number of reasons why they do this.

fwiw, I misread your 15% as 25% for some reason...

[nztyke]

20% is year to date as stated. Last couple of years are similar however i agree it's short term in the scheme of things.
My point was that I don't think the harmoney returns are that great for an unsecured investment, particularly now we have v1.5.

Anyone who thinks that a 20% return on equites is sustainable is living in cloud cuckoo land. Myles is right, you have to look at shares as a long term investment. For example in from my own experience for the year to 10th May 2006 my share investments made a whopping return of 39.6% but in the year to 28th October 2008 I suffered a calamitous loss of 42.2% on my portfolio. Over the last 15 years (which is the sort of time frame you should look at) I have made an average of 9.8% per annum after tax which is about what one would expect. Since the GFC low interest rates have created a huge asset bubble in shares and property; it is all going to come crashing but unfortunately I don't know whether it is going to happen next week, next year or in five years time. In the meantime one can only diversify, including Harmoney, and keep cash reserves to take advantage of the buying opportunities that the next GFC will bring. Sorry to be so gloomy.

[joker]

Anyone who thinks that a 20% return on equites is sustainable is living in cloud cuckoo land. Myles is right, you have to look at shares as a long term investment. For example in from my own experience for the year to 10th May 2006 my share investments made a whopping return of 39.6% but in the year to 28th October 2008 I suffered a calamitous loss of 42.2% on my portfolio. Over the last 15 years (which is the sort of time frame you should look at) I have made an average of 9.8% per annum after tax which is about what one would expect. Since the GFC low interest rates have created a huge asset bubble in shares and property; it is all going to come crashing but unfortunately I don't know whether it is going to happen next week, next year or in five years time. In the meantime one can only diversify, including Harmoney, and keep cash reserves to take advantage of the buying opportunities that the next GFC will bring. Sorry to be so gloomy.

You're not being gloomy but being realistic. You're quite right - the bust is coming but we don't know when. Never before have we seen quantative easing on such a grand scale. It's driving asset prices up but not workers' incomes. House prices, commercial property and shares are all driven up in value as a result of demand fueled by plentiful money to borrow at historically low interest rates. It all has to unwind sometime but it's never been done before so no one knows how to or what to expect.

[alistar_mid]

knowledge.

agree with everything you have said.

we are sitting on a big bubble and I have been in a cycle of not reinvesting in harmoney and paying down revolving credit for if (and when) things "crash' i can buy in.

In saying that though I still have AP's each month into managed and index funds, as yes I know they will probably be effected when the markets suddenly turns after this bull run, but like you say, when?

You try and time it and pull the money out, then you miss out on potential returns, and if you leave it in then invariably you will get beat up a bit.

I'm going to keep paying down debt, but also just going to keep AP'ing into my funds. I trust my fund manager (milford) to minimize the effect of a downturn (for reference one of their higher risk funds, the trans tasman, did -9.9% in 2009, whilst the index did -24.9%), if it drops, I might even up the AP's or drop a lump sum in.

[RMJH]

At least we didn't go the quantitative easing route in NZ, not that we are insulated from it of course. I do worry where we are heading with all this borrowing but have felt this way for at least two decades! What promoters of equities nearly always fail to acknowledge is that with shares the returns are inflated by gearing to the extent that the companies have debt. If you take out the impact of gearing and then take a long term average the returns will be much lower. If things get to the state of losing money on consumer credit portfolios I'd be picking losses on shares would be considerably greater.

[Fisherking]

Anyone who thinks that a 20% return on equites is sustainable is living in cloud cuckoo land. Myles is right, you have to look at shares as a long term investment. For example in from my own experience for the year to 10th May 2006 my share investments made a whopping return of 39.6% but in the year to 28th October 2008 I suffered a calamitous loss of 42.2% on my portfolio. Over the last 15 years (which is the sort of time frame you should look at) I have made an average of 9.8% per annum after tax which is about what one would expect. Since the GFC low interest rates have created a huge asset bubble in shares and property; it is all going to come crashing but unfortunately I don't know whether it is going to happen next week, next year or in five years time. In the meantime one can only diversify, including Harmoney, and keep cash reserves to take advantage of the buying opportunities that the next GFC will bring. Sorry to be so gloomy.

I never suggested in any way that 20% was sustainable longer term, however if you're careful about where you invest I think 10 - 15% is achievable longer term in a mix of shares/ funds. I've been able to do so across ~12yrs and i have no great knowledge anyone else doesn't have or can't obtain albeit my risk profile is possibly higher than many. To be fair, the last 12 yrs have been fairly bullish, particularly NZ except GFC and agree a fall will come at some stage, though i don't see it being imminent.

[myles]

Wow, so your RAR must be ~26%? Well done. To be this high you must be invested in very low grade loans and either got lucky or have not been in for long enough to see the defaults come through - you need a couple of years.

Been away... How can you compare 1 year of strong share growth but then say I can't compare that to 1 year of strong P2P growth - I think you missed my point, it was somewhat subtle but that is my way...

I don't need anything like 26% RAR to achieve 18% growth... Compounding of interest (i.e. reinvestment) is a very powerful growth factor for P2P which shares do not have (many here simply don't seem to get this...). Let's say I earn 15% growth (interest-fees-tax) in a year, that means my principal for the second year (it's monthly I know, but showing it for a year is easier) is 15% larger than it was the previous year, so it will earn an additional 2.25% the second year 3.32% the third year etc. (performance is even better with monthly interest as it is with Harmoney). You do not get compounding with shares.

Even at modest interest rates, I'd suggest Harmoney investments will outperform shares in as little as 5 years, and that's on the up-cycle with shares... Of course you need to make some effort to not pick loans that are more likely to default, same as shares - you don't pick crap shares - this is what makes the difference between those who make good returns and those that don't.

RAR will not show this end-on-end growth, it simply looks at individual loan growth.

[Saamee]

Back in the USA > Lending Club shares have plummeted by almost 20% > Cannot get high quality Borrowers!

http://www.zerohedge.com/news/2017-11-08/lending-club-crashes-near-record-lows-after-slashing-guidance

[myles]

Attracting borrowers doesn't appear to be the problem for Harmoney at the moment that it is for Lending Club?

[Halebop]

Have been playing with Harmoney data extracts in Tableau with pleasing visual results.

Some notable features of performance:
Harmoney's fees have almost topped out at their maximum possible, the big temporary spike early in the piece is an interesting view of the impact of re-writes when the fee was based on origination rather than interest income. So far they have been a bit light on adding significant or profitable features so with income growth now likely peaking, I wonder what they will conjure to extend their revenue base?
Recent weeks echo a few forum comments about larger loan losses (I have mostly C, D and a lesser number of E loans)

9274

[Wsp]

I see on the marketplace statistics page the platform RAR has really been trending down all year. https://www.harmoney.co.nz/investors/marketplace-statistics

[blackcap]

Been away... How can you compare 1 year of strong share growth but then say I can't compare that to 1 year of strong P2P growth - I think you missed my point, it was somewhat subtle but that is my way...

I don't need anything like 26% RAR to achieve 18% growth... Compounding of interest (i.e. reinvestment) is a very powerful growth factor. You do not get compounding with shares.
.

Agree compounding is a very powerful growth factor. But disagree that you do not get compounding with shares. You do. Dividends are/can be reinvested and any earnings the company retains are often reinvested in the company which leads to higher EPS the following year.
15% growth on lending is not sustainable long term. You have probably got lucky. At 15% you will experience total capital degradation or write off of a few of your loans over time.

[myles]

Agree compounding is a very powerful growth factor. But disagree that you do not get compounding with shares. You do. Dividends are/can be reinvested and any earnings the company retains are often reinvested in the company which leads to higher EPS the following year.
15% growth on lending is not sustainable long term. You have probably got lucky. At 15% you will experience total capital degradation or write off of a few of your loans over time.

I don't fully disagree, but the compounding effect is very different. In 'lean' years you don't get dividends, typically dividends run at only 2 - 3%. When shares drop significantly, which they do, it can take a very long time to claw back those losses. Neither of these occur with P2P Lending. However you do get share value growth in good years, but to offset that you get share value loss in bad years (usually quite significant).

My return is currently running at just under 18% (after tax and fees), but I view my predicted actual return based on deducting all loans in arrears over 30 days, which gives me a current return of just over 15%. The total number of loans in arrears over 30 days appears to be fairly stable for me now, but perhaps this will change? Interestingly if I use Harmoney figures of expected defaults I get a predicted return of 15.47% (seems to be a reasonable value). My actual over 30 days arrears rate is 1.23%, Harmoney predicted figure 1.58%, however the loans in arrears returned in the exported report from Harmoney do seem to have major issues i.e. loans in arrears are not reported as being in arrears...

With over 1000 loans I don't think 'luck' has all that much to do with it?

[alistar_mid]

I don't fully disagree, but the compounding effect is very different. In 'lean' years you don't get dividends, typically dividends run at only 2 - 3%. When shares drop significantly, which they do, it can take a very long time to claw back those losses. Neither of these occur with P2P Lending. However you do get share value growth in good years, but to offset that you get share value loss in bad years (usually quite significant).

My return is currently running at just under 18% (after tax and fees), but I view my predicted actual return based on deducting all loans in arrears over 30 days, which gives me a current return of just over 15%. The total number of loans in arrears over 30 days appears to be fairly stable for me now, but perhaps this will change? Interestingly if I use Harmoney figures of expected defaults I get a predicted return of 15.47% (seems to be a reasonable value). My actual over 30 days arrears rate is 1.23%, Harmoney predicted figure 1.58%, however the loans in arrears returned in the exported report from Harmoney do seem to have major issues i.e. loans in arrears are not reported as being in arrears...

With over 1000 loans I don't think 'luck' has all that much to do with it?

so your'e reinvesting?

Can you do a graph of your outstanding principle over time? - just out of interest to see what it would look like, it should kinda be a compounding growth right?

I have just done my first month of re investing, but also got hammered by writeoffs at the same time so made like $200 on a $70k outstanding principle.

[myles]

Can you do a graph of your outstanding principle over time? - just out of interest to see what it would look like, it should kinda be a compounding growth right?

Outstanding principal (blue) bounces around a bit as big lumps come back that take a bit of time to reinvest, but I plot the actual gain (red => Outstanding Principle + Funds Available - 100K) which still looks pretty linear. I deposited 100K and have not withdrawn or deposited since.

If I draw a straight line along the red line, there is a slight upward curve.

9278

[Cool Bear]

Outstanding principal (blue) bounces around a bit as big lumps come back that take a bit of time to reinvest, but I plot the actual gain (red => Outstanding Principle + Funds Available - 100K) which still looks pretty linear. I deposited 100K and have not withdrawn or deposited since.

If I draw a straight line along the red line, there is a slight upward curve.

9278

Hi Myles
I think the big difference between what your current actual gain and the RAR is the effect of the Payment protect on your outstanding principal. We have started another Harmoney account recently - just over a month. Already, the payment protect effect pushes up the total gain from a mere 3.7% (without) to over 20% (including the payment protect) based on a simple increase in total/total invested (including cash balance). The low 3.7% is because we have over $10,000 sitting in cash over the 5 to 6 weeks all the time (with money in every week) and that most of the loans invested have not started paying interest yet. Total interest is just about $160 but payment protect already added about $760 to our outstanding principal. Over time the effect will lessen as the increase from payment protect is just a once off for each loan. Also, if a loan with payment protect gets paid off early, you may actually lose some money instead of gain. However, in the long run, Harmoney expects that payment protect adds more than 1% (I think it may be a touch more) to your RAR, even with both the early repayments and the principal waived.

[myles]

Hey CoolBear, not sure exactly what you're referring to re actual gain vs RAR, but I agree with what you've said about the Payment Protect - certainly seem to be a positive for lenders.

My current RAR - 17.75% - has pretty much caught up with my actual gain which fluctuates in the range 17.5 to 18%, however the actual gain is after tax, where RAR is before tax. (I've yet to see the typical drop in RAR, but I'm sure it's coming). I currently have 5 charge-offs included, this will increase, but I'm hoping the reinvestment gains will go some way to cover those losses - at this point in time the straight line gain shown in the graph above indicates it is covering all of them. I'm predicting a 2.5 - 3% drop in the current actual gain from defaults over time - this represents around 65 defaults per year.

I'm being significantly more selective of loans in the lead up to Christmas, but suspect I'll see an increase of defaults in the future from this period of loans.

[Cool Bear]

Hey CoolBear, not sure exactly what you're referring to re actual gain vs RAR, but I agree with what you've said about the Payment Protect - certainly seem to be a positive for lenders.

My current RAR - 17.75% - has pretty much caught up with my actual gain which fluctuates in the range 17.5 to 18%, however the actual gain is after tax, where RAR is before tax. .
That is what I meant. Your actual gain if you include tax would be at least 21+% (to 25% depending on your tax rate) but your RAR is "just" 17.75%.

[icyfire]

Is it for real that a borrower in their 20s earning $12,455.72 (after tax) a month and lives in Invercargill and needs $5,500 to go on holiday? I want to know what this borrower does for a job!
9289

[darrenc]

Is it for real that a borrower in their 20s earning $12,455.72 (after tax) a month and lives in Invercargill and needs $5,500 to go on holiday? I want to know what this borrower does for a job!
9289

Could be running a boarding house or brothel and have lots of borrowing already

[777]

Anyone having trouble logging into Harmoney this morning?

[freddagg]

Affirmative.

[777]

Affirmative.

Thanks......

[kiwi_on_OE]

yeah, reckons my email/pswd is wrong

[777]

yeah, reckons my email/pswd is wrong

That is what I got also. Scared to try again in case it locks me out.

[Cool Bear]

Anyone having trouble logging into Harmoney this morning?
message on their sign in screen:
"We are currently experiencing login issues for some users - sorry for the inconvenience"

We are currently experiencing login issues for some users - sorry for the inconvenience.We are currently experiencing login issues for some users - sorry for the inconvenience.We are currently experiencing login issues for some users - sorry for the inconvenience.

[Cool Bear]

message on their sign in screen:
"We are currently experiencing login issues for some users - sorry for the inconvenience"

We are currently experiencing login issues for some users - sorry for the inconvenience.We are currently experiencing login issues for some users - sorry for the inconvenience.We are currently experiencing login issues for some users - sorry for the inconvenience.


I cannot get in as well. Anyone here can? Or does their "some" meant "all"

[Saamee]

I cannot get in as well. Anyone here can? Or does their "some" meant "all"

No issues all day - last used at 12.56

[IntheRearWithTheGear]

I had the problem, with not being able to re-get back in.

They have sent some sort of new agreement email which has a link to revalidate your email address account - in order to prove recept of new terms and conditions.

Once you done this it starts to work again - however this email will get caught up in spam filters etc.

Bit silly really as how do people know the email is from them to start with.

ensure to whitelist
service@harmoney.co.nz




Looks like they are using some sort of third party to send it this email on their behalf.
Received: from [54.158.151.222] by mandrillapp.com


Anyway, it is what it is.

[freddagg]

I did not receive an email to revalidate and I can login again now.

[Art]

I did not receive an email to revalidate and I can login again now.

Same here.

[777]

Of interest.

https://www.stuff.co.nz/business/industries/99287834/financial-regulator-shines-light-on-p2p-lending-crowdfunding

[kiwi783]

Had my first charge-off. An A4 from Sept 2016 with last payment in May 2017. I hope is not a harbinger of things to come as I've been much more cautious with mainly A's and B's. A question for more experienced members:- The Residential Status now shows as "other" and time as "0 months". I checked the data from previous data extracts and the Residential Status was originally "Owned - Paying Mortgage". Is this change of status normal for Harmoney process or does it suggest something else?

[Wsp]

Where Harmoney gets updated details about a borrower it updates things like residential status and location. I have a couple of borrowers now listed as living in Australia

[kiwi783]

thanks @wsp. Yes, Residential Status is a key variable we look at for lending decision. It is somewhere between frustrating and suspicious to watch it change post loan being taken, particularly when the loan then gets charged off with little prospect of recovery. The joys of P2P investing.

[CageyB]

Had my first charge-off. An A4 from Sept 2016 with last payment in May 2017. I hope is not a harbinger of things to come as I've been much more cautious with mainly A's and B's. A question for more experienced members:- The Residential Status now shows as "other" and time as "0 months". I checked the data from previous data extracts and the Residential Status was originally "Owned - Paying Mortgage". Is this change of status normal for Harmoney process or does it suggest something else?

That seems pretty unlucky. I've had 11 defaults, 1 each B,C,D and the rest E. (I don't invest in F).

[hardt]

9308

"Get the car that I want with all the extras and get it now rather than later..."

100% chance of a default from people who treat money like this.

[whitt]

Anybody else find there RAR graph has been steadily trending down lately?
I have invested since Oct 2015 and I thought RAR should have stabilized by now however it isn't.

9315

[Saamee]

Mine is going down.... Seems to be after a few Write Offs and repayments in full???

[whitt]

Mine is going down.... Seems to be after a few Write Offs and repayments in full???
Maybe the new fee structure a few months back from harmoney is dragging rar down too.

[permutation]

Anybody else find there RAR graph has been steadily trending down lately?
I have invested since Oct 2015 and I thought RAR should have stabilized by now however it isn't.

I started March 2015, had a period of falling RAR while shaking off most of the E and F defaults.
Have re concentrated my lending to a very narrow range in the mid grades several months ago and my latest RAR has increased to 14.51%

I have had an all-time loan total of over 1550 and 29 Charge-offs. Approx. 46% of my loans have been repaid but I actively pursue new loans with the spare cash.

9316

[Saamee]

Maybe the new fee structure a few months back from harmoney is dragging rar down too.

Personally I never accepted the new T & C's with the 1st Fee change.... Not invested new $$'s here for what... 18 months now..... ( Got you PM ok will do )

[hardt]

Anybody else find there RAR graph has been steadily trending down lately?
I have invested since Oct 2015 and I thought RAR should have stabilized by now however it isn't.

9315

What is your grade break up like?

[Saamee]

Personally I never accepted the new T & C's with the 1st Fee change.... Not invested new $$'s here for what... 18 months now..... ( Got you PM ok will do )

Latest RAR

9317

[Timmay]

Hi all, first post here. I've opened an account as in the last few years I've got more serious about making my money work for me and being able to retire at 55 (my goal) which is 24 years away for me. Below is my RAR, circa $2000 invested initially all interest reinvested with top ups to nearest 25$, now about $3k --- no arrears or write offs. I'm looking at branching out into shares and other P2P platforms. My goal is 10-12% returns due to the time I have available.

9318

[RMJH]

MY RAR is declining - down about 50 pips even with a slight increase in risk profile (no longer investing in As). Fees are up and rates down but also my charge-offs are climbing. As I posted a while back, according to Zopa in the UK these have been at historical lows in the last few years and are expected to increase in that market. It appears that Harmoney see it differently over here and reduced rates following a period of lower than expected charge-offs. I'm picking returns will continue to reduce but accept that we had it very good for a while with low fees and low charge-offs.

[alistar_mid]

9319

heres mine

spikes at beginning are cause I invested another $50k 3 months in

rare stabilized slowly going down if anything, but like a lot of people my defaults are E's and F's, and I'm making sure my reinvestments are B,C,D avoiding the E's and F's

[Entrep]

Anyone know what this article is all about? https://www.nbr.co.nz/article/joke%E2%80%99s-peer-peer-lending-cs-p-210923

[777]

Anyone know what this article is all about? https://www.nbr.co.nz/article/joke%E2%80%99s-peer-peer-lending-cs-p-210923


Behind pay wall.

[alistar_mid]

Behind pay wall.

yes, give us some screen grabs

[Cool Bear]

I always thought that my writeoffs (or charge off) as a percentage of gross interest is very high at 21.1% (20.8% after recoveries). That was because my spreadsheet estimated it as just below 10% based on Harmoney's figures. However, I just noted that based on Harmoney statistics today - total charge off $19,076,967 and total interest paid $86,179,074 (10 Dec), the actual overall ratio is a very high 22.14%. So mine is actually below the average!!

[Investor]

yes, give us some screen grabs

I've just read the article. I suggest you get a subscription to the NBR if you wish to know of its content.

[alistar_mid]

I've just read the article. I suggest you get a subscription to the NBR if you wish to know of its content.

https://i.imgur.com/VGQP9pV.gif

[joker]

Another case of successful fraud at Harmoney.
Grade D3, borrowed $30,000, never made a payment yet supposedly earned $147,000 per annum after tax. Loan comment "This is going to give me an amazing family holiday." I guess I should have avoided loans for holidays - especially to people who earn enough to pay cash for their holidays! Also was a rewrite - Harmoney claims that rewrites are only available to borrowers with an excellent payment history yet this guy hadn't even made a payment before getting a rewrite increasing his loan from $6k to $30k!

9330

[777]

Do any of these get to court?

[joker]

Do any of these get to court?

I've never heard of one making it to court. In this case Harmoney got their $1000 lending fees paid by the investors - the only losers of the $30,500 are the investors so I guess Harmoney isn't too worried about chasing it.

It's also possible that the guy was jailed on other charges (maybe his amazing income was from selling meth) and now he's having that "amazing family holiday" in the can.

[hardt]

Another case of successful fraud at Harmoney.
Grade D3, borrowed $30,000, never made a payment yet supposedly earned $147,000 per annum after tax. Loan comment "This is going to give me an amazing family holiday." I guess I should have avoided loans for holidays - especially to people who earn enough to pay cash for their holidays! Also was a rewrite - Harmoney claims that rewrites are only available to borrowers with an excellent payment history yet this guy hadn't even made a payment before getting a rewrite increasing his loan from $6k to $30k!

9330

Time at employer of 1 year, is boarding, earning 140k and it being packaged as a D rated loan - should have been enough to deter you.

[joker]

Time at employer of 1 year, is boarding, earning 140k and it being packaged as a D rated loan - should have been enough to deter you.

You're rught - red flags everywhere but unfortunately it was bought by autolend. As soon as I saw it I smelt a rat - but I thought Harmoney was able to confirm incomes through access to bank deposit data?

[beacon]

Not a pretty picture, increasing risk and diminishing returns in a goldilocks economy - RAR falling, 15% fees, 22% arrears, 25% tax approx. Looks like screening not stringent enough at Harmoney.

[alistar_mid]

Time at employer of 1 year, is boarding, earning 140k and it being packaged as a D rated loan - should have been enough to deter you.

lol, many of us have a sizeable chunk in so its not worthwhile to read individual loans, we trust harmonies algorithms to correctly assess each loan.

It comes down to how much is your time worth?

[Investor]

Not a pretty picture, increasing risk and diminishing returns in a goldilocks economy - RAR falling, 15% fees, 22% arrears, 25% tax approx. Looks like screening not stringent enough at Harmoney.

Your RAR is supposed to fall over time as more defaults naturally occur. Depending on your fee & tax rate, it is still possible to obtain a return of 12% p.a. after fees, tax and Harmoney's predicted default levels.

[whitt]

Harmoney today have emailed saying they will on sell the charged off loans to a third party.

I cant see this as good as the incentive is gone for Harmoney to chase loans in arrears. Previously it was in Harmoneys best interest to keep arreared loans under control so the charged off department had less work.
Now nothing stops them giving up, throwing it into charged off then onselling that loan.

[Art]

Harmoney today have emailed saying they will on sell the charged off loans to a third party.

I cant see this as good as the incentive is gone for Harmoney to chase loans in arrears. Previously it was in Harmoneys best interest to keep arreared loans under control so the charged off department had less work.
Now nothing stops them giving up, throwing it into charged off then onselling that loan.

Clearly Harmoney are not currently following up charged-off loans, $6 recovered out of $2,800 charged-off for me, so anything we can get for them from a third party will be better than the present situation in my view.

[beacon]

Your RAR is supposed to fall over time as more defaults naturally occur. Depending on your fee & tax rate, it is still possible to obtain a return of 12% p.a. after fees, tax and Harmoney's predicted default levels.
Indeed Investor, at 15% fees, less than 4% default and low-mid income tax rates. For someone on higher tax rates, 12% net of all these is now an unsustainable dream. Scorecard 1.5 squeezed gross rates, and arrears and defaults continue to rise disproportionately into the tail end of their hazard curve. Justification given for lender margin squeeze was safer, tightly screened borrowers. I haven't seen that coming through yet, but then its only been 4 months since August. Next year's Harmoney performance will be crucial, especially with competition keeping arrears and defaults manageable.

[beetills]

Harmoney to start using debt collectors according to article on Interest.co.nz

[777]

Harmoney to start using debt collectors according to article on Interest.co.nz

Read the previous two posts.

[permutation]

Indeed Investor, at 15% fees, less than 4% default and low-mid income tax rates. For someone on higher tax rates, 12% net of all these is now an unsustainable dream. Scorecard 1.5 squeezed gross rates, and arrears and defaults continue to rise disproportionately into the tail end of their hazard curve. Justification given for lender margin squeeze was safer, tightly screened borrowers. I haven't seen that coming through yet, but then its only been 4 months since August. Next year's Harmoney performance will be crucial, especially with competition keeping arrears and defaults manageable.

Hope is at hand; I have just reached a personal milestone, My RAR as at DEC09, 14.60%, have been in 33 months, this is 350 pips above the platform RAR of 11.10%

With over 1550 all-time loans, I think I have found my utopia of Harmoney investing. "Diligence in Selection of Loans".

Two points that I would like to mention, E and F grades, that I stopped lending too more than a year ago, have now reached break even with a default rate of 15 per 100 loans. So if the remaining 20% of the original loans end full term, I will have about an 11% gross return. But no more E and F for me. (Don't want red ink on my copy book)

Secondly, for the record, I have had only one(1) B Grade Charge-off from a total of 489 all-time loans taken in this grade from March 2015, that equates to a default of 0.20 loans per 100.

[BJ1]

Harmoney today have emailed saying they will on sell the charged off loans to a third party.

I cant see this as good as the incentive is gone for Harmoney to chase loans in arrears. Previously it was in Harmoneys best interest to keep arreared loans under control so the charged off department had less work.
Now nothing stops them giving up, throwing it into charged off then onselling that loan.

Questions are - is this a breach of contract between Harmony and all current investors? Do enough investors care to make an issue of it? Would making an issue of it return money to us? Should we just roll over and allow such changes to the terms on which we invested in loans? My view - I never expected any return on defaulted loans, haven't received any and don't want the stress levels with objecting to Harmoney failings (as yet).

[myles]

Best read the agreement:

https://www.harmoney.co.nz/assets/Legal-Documents-NZ/Harmoney-Investor-Agreement-03-October-2017.pdf

Collection Services - 57

"selling any Loans that have been charged off if and on suchterms (including as to price) as Harmoney considersappropriate"

[BJ1]

Best read the agreement:

https://www.harmoney.co.nz/assets/Legal-Documents-NZ/Harmoney-Investor-Agreement-03-October-2017.pdf

Collection Services - 57

"selling any Loans that have been charged off if and on suchterms (including as to price) as Harmoney considersappropriate"
But what we don't know is if now there is no appropriate considering involved - has Harmoney taken a business decision not to attempt any recovery at all, merely to quit its responsibility for a price. That isn't what the original deal considered at all. But, we don't know. Given that the contract already allowed for loans to be sold after appropriate consideration, what has changed that we needed to be told about it?

[beacon]

RAR as at DEC09, 14.60%, have been in 33 months, this is 350 pips above the platform RAR of 11.10%

With over 1550 all-time loans, I think I have found my utopia of Harmoney investing. "Diligence in Selection of Loans".

I have had only one(1) B Grade Charge-off from a total of 489 all-time loans taken in this grade from March 2015, that equates to a default of 0.20 loans per 100.

Well done, and well deserved, for all the effortthat would have taken. :)

[beacon]

... merely to quit its responsibility for a price. That isn't what the original deal considered at all. But, we don't know. Given that the contract already allowed for loans to be sold after appropriate consideration, what has changed that we needed to be told about it?
Debt Sale was part of the plan from the beginning, but to answer your question, I think it is just that Harmoney sees easier pickings in matchmaking and value-added like Payment Protect, rather than in attempting recovery. There is no harm in that, so long as investors don't suffer. Depending on age, type and size of portfolio, debt sells for 2-20% of the face value of debt, so you will get your recovery faster. Harmoney would sell it only after it has made the easier initial recovery efforts. Lender still bears the loss of charge-offs though, so unless Harmoney sharpens up its borrower screening, investor losses will come back to bite its bum (as investors start to migrate to its more efficient competitors, and there will be less retail left to matchmake). Saamee's got an interesting summary of his LC portfolio performance on Lending Crowd thread, for example.

[myles]

Given that the contract already allowed for loans to be sold after appropriate consideration, what has changed that we needed to be told about it?

Prior to the announcement they weren't doing it (but could), now they are? Details of the process were linked in the email.

To me it appears that Harmoney are working to gain additional funds back for investors - a positive not a negative.

[Art]

Prior to the announcement they weren't doing it (but could), now they are? Details of the process were linked in the email.

To me it appears that Harmoney are working to gain additional funds back for investors - a positive not a negative.

I see it as a positive too. Looking forward to getting a little bit of cash for my charged-off loans - I wonder when we will see some money coming in?

[Saamee]

I see it as a positive too. Looking forward to getting a little bit of cash for my charged-off loans - I wonder when we will see some money coming in?

I see it as further Negative.

HM were NOT actively doing it before this. ( 14 loans have been written off = NO Collections ever )

Now they are willing to have a Dutch Auction to Sell off Bad Debt to a 3rd party.

To me this is HM just washing their hands even more vigorously of the Investors Interest. ( Literally plus Capital!! )

[myles]

HM were NOT actively doing it before this. ( 14 loans have been written off = NO Collections ever )
Just because the collection process hasn't been successful doesn't mean it's not being done? Adding an additional step should see some return, which is better than nothing?


To me this is HM just washing their hands even more vigorously of the Investors Interest.
This is in addition to what they currently do?

[Saamee]

Just because the collection process hasn't been successful doesn't mean it's not being done? Adding an additional step should see some return, which is better than nothing?


This is in addition to what they currently do?

@Myles > My take from the HM Email was that HM were getting out of Debt Collections and just going to Outsource the Debt ( ie Sell the failed loan ) and that is all total sum of funds that will be recovered ( the Sale Fee ) any further recovered funds by the 3rd party company become THEIR PROFITS!

[myles]

@Myles > My take from the HM Email was that HM were getting out of Debt Collections and just going to Outsource the Debt ( ie Sell the failed loan ) and that is all total sum of funds that will be recovered ( the Sale Fee ) any further recovered funds by the 3rd party company become THEIR PROFITS!
I can't see where there is any suggestion that Harmoney is "getting out of Debt Collections", their current process is to hand off to a third party after 120 days, they are now just adding in the process of selling off that debt for a partial return on those that they see as unlikely to return dollars to investors. If it costs Harmoney more to pursue a debt than it's worth, then there is no point in pursuing it - investors will see no return from it... Of course the 3rd party needs to make a profit!? - the overall result should be that investors see some return rather than none...

[Bjauck]

Your RAR is supposed to fall over time as more defaults naturally occur. Depending on your fee & tax rate, it is still possible to obtain a return of 12% p.a. after fees, tax and Harmoney's predicted default levels. I guess it is possible for a minority.

For the average retail investor on 33% marginal tax, and not in the business of lending, with an average before tax RAR of 13% that would equate to an after tax return of about 8% as effective tax would be more than 33% on the Harmoney supplied before tax RAR. You need to allow for the tax effect as a result of the RAR reflecting the average 20% of gross interest being eaten up as a capital loss (charge offs.)

i think outsourcing collection to a good quality specialist collector could be good if it allows Harmoney to concentrate on improving the quality of its lending.

[joker]

...i think outsourcing collection to a good quality specialist collector could be good if it allows Harmoney to concentrate on improving the quality of its lending.

More likely Harmoney will concentrate on the quantity of its profit by disestablishing the collections department!

[Art]

More likely Harmoney will concentrate on the quantity of its profit by disestablishing the collections department!

You can always look for a negative in anything Harmoney does, but if you feel that way you probably should not invest with them. As I have previously posted I have not seen much action on following up charged-off loans in the past, so if we are going to get a few shekels for what I had considered lost money up until now, well it sounds good to me. I don't understand why anyone would think that Harmoney will not continue to chase the easy pickings (i.e. pre charge-off arrears). Nothing in their email to lenders suggested that.

[BJ1]

I guess it is possible for a minority.

For the average retail investor not in the business of lending, .

I suggest that Harmoney investors need to carefully consider what the tax acts say about lending losses. Section DB31 states that a person is allowed a deduction for a bad debt written off in an income year. There are limitations but it seems to me that Harmoney investors are generally entitled to claim loss deductions under sub sections 2 and 3. Don't take my view as gospel, but have a good think about matters before accepting that you aren't entitled. If you are deriving taxable income from your activities, are you not "in business"?

On another note, I don't recall ever seeing stats on what percentage of loan charge offs has been recovered by collection action. If anyone can point me to such info I'd appreciate it, as it seems there is a lot of speculation about what Harmoney may or may not be doing, but no data available to assess the recent email advice.

[Bjauck]

I suggest that Harmoney investors need to carefully consider what the tax acts say about lending losses. Section DB31 states that a person is allowed a deduction for a bad debt written off in an income year. There are limitations but it seems to me that Harmoney investors are generally entitled to claim loss deductions under sub sections 2 and 3. Don't take my view as gospel, but have a good think about matters before accepting that you aren't entitled. If you are deriving taxable income from your activities, are you not "in business"?....

Definitely seek advice.

I agree there could be a good point that if you invest in many fractionalised notes through Harmoney that you could be said to be "in business". However there has been no ruling on this point and Harmoney is not bothering to seek a ruling, claiming that all their depositors have "different circumstances." There has been no general ruling as to how charge-offs should be treated, irrespective of the individual investors being "in business" or not.

If you use Harmoney's auto-invest to invest in Harmoney notes are you in a business?
If you log into the website several times a day to invest in notes are you in business?

Investors on the Harmoney platform are covered by the financial arrangement rules but may or may not "be in business"

It would be great to have clarity and for all P2P investors to be covered by the same rules as to deductibility of fees and charge-offs. A real peer-to-peer scenario? However NZ has not made such a ruling.

When all those finance companies collapsed, many small portfolio depositors ended up with bad debts which ended up not being deductible for tax purposes.

DYOR.

[BJ1]

Just one more point: Section EW11 states that financial arrangements rules do not apply to the calculation of resident passive income. Investments in finance companies are in my view passive as there is no interaction between the parties. Hence the inability to deduct losses when those companies failed. However, direct one to one lending via an agent who is paid to manage that lending on a daily basis and to conduct arrears management is not passive, in my view.

[permutation]

There was a message on the Harmoney Dashboard saying no loans will be released to the marketplace over the Holiday period from the 23rd to 26th December.
Yet on the 26th Boxing Day they released 39 Loans, who was told about that? Did anyone using this forum get any?

[Saamee]

There was a message on the Harmoney Dashboard saying no loans will be released to the marketplace over the Holiday period from the 23rd to 26th December.
Yet on the 26th Boxing Day they released 39 Loans, who was told about that? Did anyone using this forum get any?

A bit of confusion shown by HM between TWO messages!

9365

[joker]

There was a message on the Harmoney Dashboard saying no loans will be released to the marketplace over the Holiday period from the 23rd to 26th December.
Yet on the 26th Boxing Day they released 39 Loans, who was told about that? Did anyone using this forum get any?

I didn't get notified but my auto-lend got 9 of them. However one of them looks very dodgy...Monthly income $18,633 after tax, rewrite of previous loan after no payments and borrowing $30,000 @ 21.49%. Lives with parents! I've got a feeling an early charge-off is coming. Does Harmoney actually check the borrower's income details?
9366

[Bjauck]

Just one more point: Section EW11 states that financial arrangements rules do not apply to the calculation of resident passive income. Investments in finance companies are in my view passive as there is no interaction between the parties. Hence the inability to deduct losses when those companies failed. However, direct one to one lending via an agent who is paid to manage that lending on a daily basis and to conduct arrears management is not passive, in my view.

2016 Article from Deloitte on bad debts and P2P in NZ. https://www2.deloitte.com/nz/en/pages/tax-alerts/articles/peering-into-tax-bad-debts-and-p2p-lending.html

[joker]

How is this possible? Below is a screenshot of a loan listed 04/01/2018. Harmoney claims that the borrower has an after tax monthly income of $19,378.33 which equates to $4,400 per week after tax and around $350,000 p.a. gross.
The borrower states “I am looking forward to being able to consolidate my income and get ahead in the new year”. The level of income and the borrower’s comments seem mutually exclusive/extremely unlikely. The interest rate of 21.49% also seems to discredit the borrower’s income claim. How robust is Harmoney's checking system?
9381

[Wsp]

Looks like they borrower entered their annual income as a monthly figure. Perhaps Harmoney doesn’t place huge weighting on income figures in their loan grades. I suspect they simply rely on they credit ratings of each borrower and grade according to that with a few tweaks.

[BJ1]

And how many people using autolend have picked up a piece of this? If such information is being trusted then there is no point in reading the info provided - investors may as well just take a piece of every loan within their grade parameters and hope for a portfolio average based on those. Not my cup of tea!

[joker]

How is this possible? Below is a screenshot of a loan listed 04/01/2018. Harmoney claims that the borrower has an after tax monthly income of $19,378.33 which equates to $4,400 per week after tax and around $350,000 p.a. gross.
The borrower states “I am looking forward to being able to consolidate my income and get ahead in the new year”. The level of income and the borrower’s comments seem mutually exclusive/extremely unlikely. The interest rate of 21.49% also seems to discredit the borrower’s income claim. How robust is Harmoney's checking system?
9381


Looks like they borrower entered their annual income as a monthly figure. Perhaps Harmoney doesn’t place huge weighting on income figures in their loan grades. I suspect they simply rely on they credit ratings of each borrower and grade according to that with a few tweaks.

But their system as I understand it requires borrowers to upload bank statements as proof of income. If the proof isn't being verified, the whole system is useless - after all we as investors need verification that borrowers earn sufficient to repay thir loans. Additionally there is a auto-lend filter based on the percentage of repayment v. income. If income errors are present this filter is compromised. It all seems a bit Mickey Mouse - especially sice my last charge-off made no payments and had a (claimed) monthly after tax income of $12,286!

[icyfire]

Only a few of the dodgy loans get mentioned on here. I come across similar loans information that simply doesn't make sense on a regular basis. Hopefully Harmoney fixes this problem as lenders will start loosing trust in their platform.

[Saamee]

Only a few of the dodgy loans get mentioned on here. I come across similar loans information that simply doesn't make sense on a regular basis. Hopefully Harmoney fixes this problem as lenders will start loosing trust in their platform.

Some 'Of Us' already have ;-)

[Investor]

Some 'Of Us' already have ;-)

And went on to earn lower returns at other P2P providers

[Saamee]

And went on to earn lower returns at other P2P providers

@investor > I'm sure you must be speaking for yourself ( but not for me! )

My HM Rar is 11.74% where as over at LC it is 12.65% ( this month ) as I posted over at LC on 19 Dec 17

[myles]

LC NAR: 14.01% (no longer investing - various reasons)
HM RAR: 17.84% (now have a second account for further investing)

Everyone invests differently and makes different returns...even when people invest in the same 'grades' of loans the outcome will be very different...

[leesal]

On Platform 1.5 I'm 12.8% RAR after just over 4 months.

I have no trust in XIRR, so calculate my own adjusted version of RAR, which is at 11.87%:

Number of individual units ($25 blocks) months paid: 504
Number of unit months missed payment: 8
Nominal interest rate (using WA) of those units: 18.34% (includes payment protect)
Compound interest rate of those units: 19.96%
Harmoney charges (currently @20%): -4.0%

Expect defaults:
-I have 8 arrears between 1-30 days, although HM only records 1. This includes a 10 day buffer (I ignore payments 0-10 days late). Zero 31-60 days.
-Estimate the probability of default as 20% on 1-30; 70% on 31-60%; 100% 61+ days. This is applied against the outstanding sum (not the missed payment).
- Giving expected defaults of: $220 (outstanding principal on missed payments) x 20% = $44
Expect default RAR impact: - 4.1%

19.96%-4%-4.1% = Overall 11.87%


Will be interesting to see how it pans out, I've increased my risk mix (more CDEFs), so expected return on all loans with or without payments calculates to 22.7% compounded. With the likelihood of increased arrears I'm hoping my adjusted RAR can stay above 12%

[alistar_mid]

I have no trust in XIRR

lol wtf

Xirr is the best measure of almost any investment, especially here. Its literally when your money goes in vs when it comes out.
Its especially good for Harmoney when your deposits and withdrawals and tax returns can be at random intervals.

[leesal]

lol wtf

Xirr is the best measure of almost any investment, especially here. Its literally when your money goes in vs when it comes out.
Its especially good for Harmoney when your deposits and withdrawals and tax returns can be at random intervals.

Ok if you put it like that I'm calculating it the wrong way. Will try another

Download the latest statement "transaction detail". Dates in one column, cash outflows in the other, total balance at the end. Gives 11.70% If I factor in an estimate of defaults from arrears 8.2%.

Does that sound right?

[darrenc]

Tomorrow is my 2-year anniversary in the platform. I put $75,500 in there and I keep pretty much exactly that in there, pulling out any profit to put into LC for diversification (currently at 14.1% there with no losses).
So you can compare:
2900 loans (no auto-invest)
Just over $200,000 of loans funded
$6900 written off
$163 in arrears
$46 recovered...hopefully selling the debt might improve that
$31600 interest received
14.9% at the moment (was as high as 17% about 8 months ago and has been down as low as about 14.4%).
I was investing in all grades (selectively) but now don't. My target is 15% gross.
Actual return (excluding writing off the losses) is around 8.8% nett, not counting the 3 months it took me to get the whole $75k invested.

I'm happy with the platform, despite the losses. It's just a portion of my overall investments, not the whole shebang.

I claim my losses as I treat it like a business, evaluating and manually investing, and my accountant is comfortable with that.

[alistar_mid]

Ok if you put it like that I'm calculating it the wrong way. Will try another

Download the latest statement "transaction detail". Dates in one column, cash outflows in the other, total balance at the end. Gives 11.70% If I factor in an estimate of defaults from arrears 8.2%.

Does that sound right?

Yeah that sounds pretty legit

[alistar_mid]

Tomorrow is my 2-year anniversary in the platform. I put $75,500 in there and I keep pretty much exactly that in there, pulling out any profit to put into LC for diversification (currently at 14.1% there with no losses).
So you can compare:
2900 loans (no auto-invest)
Just over $200,000 of loans funded
$6900 written off
$163 in arrears
$46 recovered...hopefully selling the debt might improve that
$31600 interest received
14.9% at the moment (was as high as 17% about 8 months ago and has been down as low as about 14.4%).
I was investing in all grades (selectively) but now don't. My target is 15% gross.
Actual return (excluding writing off the losses) is around 8.8% nett, not counting the 3 months it took me to get the whole $75k invested.

I'm happy with the platform, despite the losses. It's just a portion of my overall investments, not the whole shebang.

I claim my losses as I treat it like a business, evaluating and manually investing, and my accountant is comfortable with that.

whats your Xirr purely of the timings of money in and money out?

[beacon]

Platform RAR dips below 11%. Reflective of lax credit performance (quality control!) and v1.5...

[leesal]

Still have issue with XIRR:

Unfunded pp shouldn't be included, likewise WHT. RAR has a common methodology, aiding comparison between portfolios. Those putting up XIRR returns cannot be consider reliable unless methods can be verified.

XIRR doesn't correctly handle part period, accrued income. eg below gives XIRR of 7.2% (should be 11%).... XIRR incorrectly assumes returns for loan1 generates zero cash for 8 days, loan2 nothing for 21 days





1/1
30/1
15/2
28/2
8/3


loan 1







principal
-1000
23.93

24.13



int 10%

8.33

8.13



princ out




951.93


loan 2







principal


-1000




int 10%







princ out




1000


cashflow
-1000
32.26
-1000
32.26
1951.93

[myles]

Why do you think it should be 11%?

What are you doing with the returned principle - reinvesting, holding, or withdrawing?

You have 1000 invested for 66 days ($16.46 return) and 1000 invested for 21 days (no return). If you weight that out for an annual return for both it comes to around 7%? XIRR is probably not the best thing to use for such a small sample...

[alistar_mid]

Still have issue with XIRR:

Unfunded pp shouldn't be included, likewise WHT. RAR has a common methodology, aiding comparison between portfolios. Those putting up XIRR returns cannot be consider reliable unless methods can be verified.

XIRR doesn't correctly handle part period, accrued income. eg below gives XIRR of 7.2% (should be 11%).... XIRR incorrectly assumes returns for loan1 generates zero cash for 8 days, loan2 nothing for 21 days





Its like you are living in the upside down world from stranger things.

Xirr cannot be verified? I don't think you know what IRR or XIRR does and what it measures.

Harmoney can tell you that you have a certain RAR, you can get all confused with money you have put into loans and then the dead period of the money being in there but not recieving an interest payment yet, all that stuff.

Xirr on the other hand is the simplest most legit measure there is. Its simply the timing of cash in vs cash out. Nothing more nothing less. Thats as real as it will ever get despite what Harmoneys internal reporting might try and tell you.

my RAR is 14.5%, my Xirr is 7%. I trust the Xirr.

The only issue is how to handle the outstanding principle. I just treat it as an outgoing cash as at the last date.

{edit} the example is an old one when I had a good XIRR, its now gone to ****e as I have had a lot of my E's defaulting. As I said my Xirr is now 7%, and the calc is too big to screen shot

[leesal]

Its like you are living in the upside down world from stranger things.

Xirr cannot be verified? I don't think you know what IRR or XIRR does and what it measures.

Harmoney can tell you that you have a certain RAR, you can get all confused with money you have put into loans and then the dead period of the money being in there but not recieving an interest payment yet, all that stuff.

Xirr on the other hand is the simplest most legit measure there is. Its simply the timing of cash in vs cash out. Nothing more nothing less. Thats as real as it will ever get despite what Harmoneys internal reporting might try and tell you.

my RAR is 14.5%, my Xirr is 7%. I trust the Xirr.

The only issue is how to handle the outstanding principle. I just treat it as an outgoing cash as at the last date.

{edit} the example is an old one when I had a good XIRR, its now gone to ****e as I have had a lot of my E's defaulting. As I said my Xirr is now 7%, and the calc is too big to screen shot

If your E's are defaulting, I'm completely screwed - 60% DEF in my portfolio.

Thanks for that example. Unfortunately it confirms to me the knowledge on IRR (or excel XIRR) here is not good. No disrespect. Your figure of 7% is not reliable, and I am 100% certain of it.

Rather then explain what you are doing wrong, it's easier to provide a tool to calculate your actual XIRR.

Instructions

1. Download your transaction statement(s). It should contain everything back to your very first deposit. Copy across your full "transaction history" into cells A to J in chronological order
2. Drop the formula's in column K:O down (highlighted in green)
3. In cell R1 - enter an estimate of your mid month outstanding principal - eg if you are downloading transactions to dec17 use the outstanding principal figure as at 15-Dec
4. In cell R2 - enter your average interest rate (grossed up for PP interest if you like). A rough estimate would probably be fine here.
5. Cell R3 - enter any additional provision you wish to make for the $ value of outstanding premiums in arrears that you believe will turn into charge-offs. If you don't know what to do here, just enter 0.

Simple and your XIRR will be displayed in cell R4.

What this will provide, is a XIRR that is tailored to Harmoney. ie strips out WHT, properly accounts for PP and correctly accrues period income.

FYI, my XIRR as at 31-Dec is 12.3% (or 14.8% if provision for arrears to default is set to 0).

[myles]

Its like you are living in the upside down world from stranger things.

Love it :t_up:

[beacon]

Rather then explain what you are doing wrong, it's easier to provide a tool to calculate your actual XIRR.

I don't look at Harmoney NAR, as it is very limiting as Alistair says. It may help compare poster portfolio performances withing Harmoney, but it is meaningless for comparisons across P2P platforms (more so, after Payment Protect).

XiRR is a superior measure for cross platform comparisons, but in a growing portfolio the difference between XiRR and other methods like yours, can be remarkable (back of envelope calculations, although I haven't checked your method fully yet).

You are also right in pointing out leesal, that XiRR does not account for accrued income, but then it is a tool made to measure performance based on actual historical cash movements. So, not an exact tool for what you are trying to achieve.

[beacon]

Inclusion of payment protect inflates not just Harmoney NAR but also XiRR heaps, in growing portfolios. Beware

[alistar_mid]

If your E's are defaulting, I'm completely screwed - 60% DEF in my portfolio.

Thanks for that example. Unfortunately it confirms to me the knowledge on IRR (or excel XIRR) here is not good. No disrespect. Your figure of 7% is not reliable, and I am 100% certain of it.

Rather then explain what you are doing wrong, it's easier to provide a tool to calculate your actual XIRR.

Instructions

1. Download your transaction statement(s). It should contain everything back to your very first deposit. Copy across your full "transaction history" into cells A to J in chronological order
2. Drop the formula's in column K:O down (highlighted in green)
3. In cell R1 - enter an estimate of your mid month outstanding principal - eg if you are downloading transactions to dec17 use the outstanding principal figure as at 15-Dec
4. In cell R2 - enter your average interest rate (grossed up for PP interest if you like). A rough estimate would probably be fine here.
5. Cell R3 - enter any additional provision you wish to make for the $ value of outstanding premiums in arrears that you believe will turn into charge-offs. If you don't know what to do here, just enter 0.

Simple and your XIRR will be displayed in cell R4.

What this will provide, is a XIRR that is tailored to Harmoney. ie strips out WHT, properly accounts for PP and correctly accrues period income.

FYI, my XIRR as at 31-Dec is 12.3% (or 14.8% if provision for arrears to default is set to 0).

lmao, you are not as smart as you seem to think you are.

Like I said in my earlier post, the only issue is how to handle the outstanding principle. That's the only difference.
You have some weird way of valuing this, based on the average interest it will get, expected defaults / arrears etc.

I have just treated is an outgoing payment on the last date. I even said that.

I would question your knowledge on IRR / XIRR when you can't see the difference is simply down to how the outstanding principle is handled, instead you think its something do to with the calculation itself.

Also you are only 4 months in (iirc), your loan portfolio is like a new born baby, you will have a low default rate and hence a high RAR / Xirr, wait til its 16 months in like some of ours and those defaults start hitting lol.

[alistar_mid]

I don't look at Harmoney NAR, as it is very limiting as Alistair says. It may help compare poster portfolio performances withing Harmoney, but it is meaningless for comparisons across P2P platforms (more so, after Payment Protect).

XiRR is a superior measure for cross platform comparisons, but in a growing portfolio the difference between XiRR and other methods like yours, can be remarkable (back of envelope calculations, although I haven't checked your method fully yet).

You are also right in pointing out leesal, that XiRR does not account for accrued income, but then it is a tool made to measure performance based on actual historical cash movements. So, not an exact tool for what you are trying to achieve.

Hes essentially doing a basic Xirr calc like anyone could, but trying to forecast out the "true" value of his outstanding principle, which I have found from experience messing around trying to forecast what that might be based on harmoneys reported default stats / interest rates, just doesn't work out, cause suddenly your portfolio gets a year old and defaults blow up lol.

[leesal]

Cheers Beacon, well put.

If you isolate payment protect loans only. XIRR will show 40-50%... Massively inflating your return if using the method Alistar_Mid is using.

Never said I was clever. However unless you have largely avoided payment protect loans - your XIRR will be overinflated.

The rest of my tool is technicality (although correct). It enables some cross checkign against RAR. Once I've gone through a cycle of loans, I'd be happy with 7%.... Who knows whats to come

[alistar_mid]

Cheers Beacon, well put.

If you isolate payment protect loans only. You will return over 50%

Alistar_Mid, how can I put this... Your probably not even returning 7% (after tax).

How can I put this, you are not anywhere close to as smart as you think you are.

Once again, the only difference is how we value the outstanding principle. The rest is sourced from Harmoneys record of deposits / withdrawls.

Because you can't seem to see this, and think its something to do with the Xirr calc itself, I can only conclude you don't know how Xirr works.

[BJ1]

Please guys: mind the personal stuff. It detracts from the discussion.
Just for info: First loan 8/2/15
Total cash in $90,169 progressively increased from initial $2,000 - total portfolio value $108,619
RAR 13.85% on 31/12 and that's the highest it's got to
Last financial year actual return on all money excl accruals 14.50% - this year dropped to date as suffered first write offs ($668)
current running yield on today's balances 17.04% before any costs

[alistar_mid]

Cheers Beacon, well put.

If you isolate payment protect loans only. XIRR will show 50%... Massively inflating your return using this calc.

Never said I was clever. Alistar_Mid unless you have largely avoided payment protect loans - your XIRR will be overinflated.

Once have gone through a cycle, I'd be happy with 7%.... Who knows whats to come

Nice edit of your earlier post....

Post tax bumps up your return. Harmoney automatically deducts their fees and then pays tax on your behalf. But their fees are tax deductible so they have effectively made you pay more tax than you should have. You then have to claim this back + claiming defaults as bad debts if you feel inclined (jury is out on that), so your post tax return is certainly more than your pre tax.

Your'e already confused because of the difference of how we handle outstanding principle - you seem to think its do to with the Xirr calc itself, now you seem to have the tax round the wrong way.

https://media1.tenor.com/images/f50d6bfbb20c1dfe09b4b0833d586712/tenor.gif

[leesal]

How can I put this, you are not anywhere close to as smart as you think you are.

Once again, the only difference is how we value the outstanding principle. The rest is sourced from Harmoneys record of deposits / withdrawls.

Because you can't seem to see this, and think its something to do with the Xirr calc itself, I can only conclude you don't know how Xirr works.

Every time you take a payment protect loan HARMONEY credits your account a small amount.

HARMONEY then adds this balance to your outstanding principal. So you take out a loan for say $1000 with pp, and you will see your outstanding principal increase by say 40. Unfortunately for us this isn't really money.

So if you are comparing your return against say lending crowd, using XIRR, you've got to at the very least strip off the payment protect part.

[myles]

Since your not prepared to explain your methods I've not looked very hard at them...

Nothing you're saying is new. The topic of the influence of Payment Protect has been covered before. Simply removing it from calculations will result in undervaluing as it has a positive return due to interest gained. I think everyone is very aware that the Harmoney RAR value is very different from XIRR (no matter how you calculate it).

Accrued income has very little impact on a portfolio with even a little maturity and in my view is completely pointless to consider in the big picture of the investment.

[leesal]

Since your not prepared to explain your methods I've not looked very hard at them...

Nothing you're saying is new. The topic of the influence of Payment Protect has been covered before. Simply removing it from calculations will result in undervaluing as it has a positive return due to interest gained. I think everyone is very aware that the Harmoney RAR value is very different from XIRR (no matter how you calculate it).

Accrued income has very little impact on a portfolio with even a little maturity and in my view is completely pointless to consider in the big picture of the investment.

Have been trying to....

The method I am using to value Payment protect, is earning out the "unearned principal" over the life of the loan

accrued income is more of a technicality - but extremely important for anyone with a portfolio less then half a year old

Removing Withholding tax enables a comparison against RAR.. And just better form in general, as everyone has different withholding tax rates.

**** Be aware though - In the spreadsheet I've included formula for withdrawals, and defaults ... I've never had either, so don't know how harmoney output this data on the extract

[beacon]

accrued income is ... extremely important for anyone with a portfolio less then half a year old

Agreed. It is quite important in growing portfolios of over a year maturity too, regardless of the platform ...

However, myles is right that in mature portfolios (ie, maybe reinvesting returns, but not investing substantial new capital) accrued capital diminishes in importance with portfolio age.

[beacon]

accrued capital diminishes in importance with portfolio age.
That should read accrued INCOME diminishes ...

[beacon]

Post tax bumps up your return. Harmoney automatically deducts their fees and then pays tax on your behalf. But their fees are tax deductible so they have effectively made you pay more tax than you should have. You then have to claim this back + claiming defaults as bad debts if you feel inclined (jury is out on that), so your post tax return is certainly more than your pre tax.

Indeed. An important factor, tax is... Advantage investors on lower tax rates, at the moment... even without compounding ...

[myles]

The method I am using to value Payment protect, is earning out the "unearned principal" over the life of the loan

But that principle earns interest, so you can't simply remove it.


accrued income is more of a technicality - but extremely important for anyone with a portfolio less then half a year old

I don't agree, but that's my take. There is so much going on in the early phase that pretty much any numbers will be of little value - better to wait for things to mature a little. An example is your example of 50% over return on an individual PP loan over, I assume, a very short period - completely pointless to consider this in this way. It's like fully valuing in a upfront fee at the start of a loan instead of across the whole period of the loan which it actually applies to.


Removing Withholding tax enables a comparison against RAR.. And just better form in general, as everyone has different withholding tax rates.

No it doesn't, they are completely different things. There is no point comparing RAR with XIRR, sorry, I think you are wrong here.


**** Be aware though - In the spreadsheet I've included formula for withdrawals, and defaults ... I've never had either, so don't know how harmoney output this data on the extract

Not going near your spreadsheet - far too messy with no descriptive detail for me...

[beacon]

Not going near your spreadsheet - far too messy with no descriptive detail for me...

Bugger, but he's been there to know that... :D

[leesal]

Bugger, but he's been there to know that... :D

lol, took that as a given!

[beacon]

lol, took that as a given!
I glanced at your spreadsheet, and although I'll not use it personally, i think you are pretty clever to have designed that...

I agree with myles though, that there is not much point comparing HM RAR with XIRR, mostly because HM RAR is no more than a feel good number at best (at least for me) ...

[alistar_mid]

Every time you take a payment protect loan HARMONEY credits your account a small amount.

HARMONEY then adds this balance to your outstanding principal. So you take out a loan for say $1000 with pp, and you will see your outstanding principal increase by say 40. Unfortunately for us this isn't really money.

So if you are comparing your return against say lending crowd, using XIRR, you've got to at the very least strip off the payment protect part.

dude, I stated in my very first post on this topic, Xirr is the best way to value it, the only issue being how to handle the outstanding principle.

You got on some sort of train that the Xirr calc is incorrect. Its not. We all know what Xirr is. You method is exactly the same as mine, up until the outstanding principle.

Can you concede and agree, the issue is around how we value the outstanding principle, not the actual Xirr calc?

I found or the tinkering with building complex spreadsheet models all go out the window when your defaults track 50% higher than what they are meant to be.

[myles]

If you isolate payment protect loans only. XIRR will show 40-50%... Massively inflating your return if using the method Alistar_Mid is using.

You've change this post from the original...your statement here is completely misleading and wrong.

[myles]

A very quick calculation on my loans indicates the effect of Payment Protect on the value of the % return on loans is less than 0.5% (>$110K value and >1200 active loans, close to 30% PP loans)... This is based on the initial inflated principal value and an increase in value of 1% due to interest gained from the PP value over the period of the loan.

If you are seeing "Massive inflating" of returns, I suspect your calculations are off...

[leesal]

I glanced at your spreadsheet, and although I'll not use it personally, i think you are pretty clever to have designed that...

I agree with myles though, that there is not much point comparing HM RAR with XIRR, mostly because HM RAR is no more than a feel good number at best (at least for me) ...


Thanks Beacon :)

[leesal]

But that principle earns interest, so you can't simply remove it.

I don't agree, but that's my take. There is so much going on in the early phase that pretty much any numbers will be of little value - better to wait for things to mature a little. An example is your example of 50% over return on an individual PP loan over, I assume, a very short period - completely pointless to consider this in this way. It's like fully valuing in a upfront fee at the start of a loan instead of across the whole period of the loan which it actually applies to.

No it doesn't, they are completely different things. There is no point comparing RAR with XIRR, sorry, I think you are wrong here.



Regarding payment protect:

No you are not removing the interest received. You work out the payment protect portion of the principal. If its $1.13 on $25 principal, it represents 4.3% of the outstanding principal on a loan.

How harmoney treats payment protect is this:
1. Take out a loan, your cash balance reduces by $25 and principal outstanding increases by $25. A net zero.
2. Payment protect unfunded, $1.13 is added to your principal outstanding; Increasing your cash balance by $1.13
3. You receive a payment - for the principal portion (eg 31 cents); 31 cents is added to your cash balance, and 31 cents is deducted your outstanding principal. Its a net zero effect.
4. For the interest potion (eg 25 cents); 25 cents is added to your cash balance. Increasing your net position by 25 cents

Net impact in month 1. of the payment protect loan is $1.38 increase in net position

How I treat payment protect is earning out the payment protect principal over the life of the loan. So the transaction flow goes like:
1. Take out a loan. +$25 principal; -$25 cash
2. Payment protect: $1.13 is excluded; 0 net effect
3. principal of 31 cents is earned. We know that this principal is broken down as 95.7% original loan and 4.3% payment protect; working out a 1.3 cents of payment protect earned for that month. So what we do is earn the payment protect by recognising this portion. This is done by increasing your cash position by 26 cents and decreasing the outstanding principal by 24.7 cents. a 1.3 cent net effect
4. Interest portion: +25 cents net effect

Net impact in month 1 of therefore changes to $0.26 increase in net position.

You can extrapolate each of the scenarios forward, if you assume the average age of your portfolio of payment protect loans is 12 months

1. Harmoney's treatment (on loan of $25, with 12% interest rate, and payment protect $1.13)
= $2.79 of interest earned; plus $1.13 of payment protect = $3.92 increase in net position.
The XIRR on this payment protect loan is 18.7%

2. The earned treatment (same loan)
= $2.79 of interest earned; $0.16 of payment protect fee earned (0.043% x $3.38 principal) = $2.95 increase in net position.
XIRR of 13.4%

Take that over an entire portfolio, eg 25% oustanding payment protect loans; 75% non payment protect or paid, all portfolio 12% loans over 60 months

harmoney's treatment would net you 75% x 12.6% plus 25% x 18.7% = 14.12%

earned treatment would give you 75% x 12.6 plus 25% x 13.4% = 12.80%

2. Accrued income:

My take is its important, your take is its not; With a portfolio of 6 months say $50,000 at an average of 20%... 15 days of that income is not getting recognised on average, so thats $400 odd that forms part of my return. Again if I've only earned $2400; thats relatively significant part of my return... However concede as your portfolio gets larger then becomes less significant. Yes there is a lack of defaults early on, by there certainly isn't a lack of late payers, which has the impact on XIRR. Yes you can argue your return doesn't matter early on, but try telling that to the next new guy who comes on.

3. Tax
Yes tax matters. Tax treatment matters, being able to deduct service fee matters. I like to keep all of my performance metrics tax free, so I can compare without worrying about the differential tax treatment. So I know that my company is returning 17% PBT return over the life of the business operations; shares 21% before tax return; pension 9% if you have investment property can shove that figure in... Alistar mentioned that he liked to know his after tax return that harmoney was reporting to him. even though he could later claim back the tax deductible part of the service fee (and possibly defaults). I like to know I've generated 20% in interest revenue, 4% service fee and 4% defaults so my overall return is 12%... Then I can benchmark that against my other investments. As soon as I start relying on harmoney's reporting, where I'm taking the 33% against the 16% giving tax of 5.28%, so a post tax of 6.72%, which really should be 8% it gets bloody confusing. So all returns pretax thats just a general rule. And yes I like to benchmark it against RAR%, as the overall measure. If I know my RAR is 10% and my XIRR might be 12%... and the average RAR is 13% of a mature portfolio, that gives me some ability to say that I can increase my XIRR% up to say 15% by introducing a different mix, or different risk selection

4. Whether you download my spreadsheet
It doesn't really bother me in the least. in the end we are all collaborating here, so if I share my methods then someone may critically evaluate them, and add an insight. It might help someone elses overall strategy, and we both benefit. If you call me out on something, then thats good its provides the ability to learn. I am not getting involved in personal insults... So will just ignore certain things of which there seem to be quite a bit of material for me to ignore... As a relative newbe I also recognise there is a learning curve. I also recognise that % return now counts for little, given the hazard curve of defaults, and prevailing market conditions in the credit market which now are extremely favourable for investment and might deteriorate significantly in a relatively short period of time. So overall Myles as you wish, I concede that with 100k in, your probably not too bothered about a few % of XIRR one way or the other.....

[leesal]

dude, I stated in my very first post on this topic, Xirr is the best way to value it, the only issue being how to handle the outstanding principle.

You got on some sort of train that the Xirr calc is incorrect. Its not. We all know what Xirr is. You method is exactly the same as mine, up until the outstanding principle.

Can you concede and agree, the issue is around how we value the outstanding principle, not the actual Xirr calc?

I found or the tinkering with building complex spreadsheet models all go out the window when your defaults track 50% higher than what they are meant to be.

Lol. Yes XIRR is all about the cashflows (and you are taking the balance of all of them at todays date which is simplistically fine.

Harmoney "toy" with those cashflows, with payment protect, your portfolio is mature and your only interested in the post tax XIRR... Also completely fine if you like... your payment protect outstanding if its running at about 20%, then you're XIRR is probably 1% overinflated (i guess). Which means pretax you're probably somewhere around 11% (if you're on 33%), not so bad.

Getting crapped out by defaults, yes thats what we are all concerned about :)

[myles]

Interest is calculated on principal including payment protect. Actually I think I'll opt out of this, not liking the undertones...

[leesal]

Interest is calculated on principal including payment protect. Actually I think I'll opt out of this, not liking the undertones...

I'll give you a moment. Read it again and I'm sure you will twig. Interest on the pp is not the relevant cashflow, its the recognition of the principle.

Otherwise... If you're 10 or so months in, with 30% outstanding in payment protect. Your XIRR is probably 1.5 to 3% inflated from the PP. (The XIRR on my PP is at 45% but I'm only 4 months in; and have only been learning today how that maps out, as I run some forecasts). Nothing beats actual data to verify, so not sure where in that range you would lie.

But in the end, doesn't matter too much its just XIRR. I said at the beginning the methods that are being used to calculate are not reliable, which during the course of this discussion have been able to identify and quantify the various components. The mature portfolio isn't going to be so far out, like Alistar_Mids, mine will be massively different... You've pointed us towards XIRR in earilier threads which you championed. In the end factoring PP probably means Harmoney's returns may not be that much higher then other P2P providers in this country, and with a significantly higher risk attributed. Esp in platform 1.5, which all the new loans are on now.

So lets move on.

[myles]

The XIRR on my PP is at 45% but I'm only 4 months in;

Clearly the mistake that you've made...


I said at the beginning the methods that are being used to calculate are not reliable

More than one of us disagree... Not sure that you can be awarded the final say...


The mature portfolio isn't going to be so far out, like Alistar_Mids, mine will be massively different...

A complete turn around from what you indicated earlier...


In the end factoring PP probably means Harmoney's returns may not be that much higher then other P2P providers in this country, and with a significantly higher risk attributed.

Somewhat of a generalisation...not my experience.


So lets move on.

Oh please, lets...:eek2:

[leesal]

Can you explain what exactly the point of that post was Myles.

It seems to me that you are just picking out random bits in isolation, in a cynically an unconstructive way.

Just because you can slap a dead cat on the table, doesn't make you the man.

[joker]

Hi Guys - all this XIRR etc. is very boring for those of us (the majority) who don't share your interest in your pet projects. Let's all agree to value our returns on our own personal preference and just get on with the job of making money. If you guys want to continue your argument please do so by personal messaging and let the forum return to its proper function.

[Soolaimon]

Hi Guys - all this XIRR etc. is very boring for those of us (the majority) who don't share your interest in your pet projects. Let's all agree to value our returns on our own personal preference and just get on with the job of making money. If you guys want to continue your argument please do so by personal messaging and let the forum return to its proper function.

Yep, agree, what is XIRR anyway?

[permutation]

I am keen to know what the simple return of the "High Rollers" on this forum that state they have between $80,000 and $110,000 lent through Harmoney Loans.
What is your return on your balance after 6 months, 1 year, 2 years or more. Rather than all this XIRR business.? Surely if you had a steady balance of $100,000 for say 12 months and received $13000 Gross interest including defaults, that would fundamentally be an excellent return.

[myles]

I am keen to know what the simple return of the "High Rollers" on this forum that state they have between $80,000 and $110,000 lent through Harmoney Loans.

15.52% after fees, taxes and defaults is my current 'if I could cash it all in tomorrow' value. But I can't cash it all in tomorrow, so how meaningful is that value?

Added: That value includes the 3.5'ish months building the the total investment which is what is used in the calculation, so my real return (which needs something like XIRR to calculate) is actually higher (at this point in time).

[Cool Bear]

I am keen to know what the simple return of the "High Rollers" on this forum that state they have between $80,000 and $110,000 lent through Harmoney Loans.
What is your return on your balance after 6 months, 1 year, 2 years or more. Rather than all this XIRR business.? Surely if you had a steady balance of $100,000 for say 12 months and received $13000 Gross interest including defaults, that would fundamentally be an excellent return.

My RAR is 14+% after almost 3 years.

[Cool Bear]

Leesal have a very valid point on the XIRR for which I can give an example on an actual fund I have invested in Harmoney on behalf of a friend. It is just 3 months old and about $80k.

The first RAR from Harmoney is:
11.34% as shown in the attached screenshot.

When I calculate the XIRR, it is 20.5%. (note for Leesal, my method is just simply accounting for deposits - no withdrawals - and taking the ending o/s bal as cash return, no individual loans calculation).

However, when I remove the PP effect on the o/s balance of approx $1435.31. ((the difference between "Borrower Principal Amount" of $81435.31 and "Loan Investments (funded)" of $80,000.00)), the resulting XIRR is just 8.26%. The difference is of no surprise to me as I expected that. The month before (2 months in) it was something like 22% vs 4%.

As time goes by, the gap will narrow a lot. My 14+% RAR for my own investment (see post above) of about 3 years have an XIRR of 14.4% and XIRR (with PP removed) of 13.4%. For all these XIRR figures, I simply added back the tax paid to date as a lump sum figure to the o/s balance to enable comparison to Harmoney's RAR.

[Cool Bear]

Please note that the screenshot in the post above was taken on 7th January 2018, while the XIRR calculation was on 31 December 2017 when total interest received was just $1282.86

[permutation]

My RAR is 14+% after almost 3 years.

Well Done:)

[Cool Bear]

Well Done:)
Thanks. Realised that I did not fully answer your question.

RAR was
14.57 at 6 mths
13.94 at 1 yr
13.80 at 18 mths
14.33 at 2 yr
14.40 at 30 mths
atm 14.39 at 30+mths

was hoping to get to 15% before version 1.5 came about. Now happy to stay between 14 and 14.5%

Your RAR from your previous posts is higher. Congrats to you too.

[leesal]

Leesal have a very valid point on the XIRR for which I can give an example on an actual fund I have invested in Harmoney on behalf of a friend. It is just 3 months old and about $80k.

The first RAR from Harmoney is:
11.34% as shown in the attached screenshot.

When I calculate the XIRR, it is 20.5%. (note for Leesal, my method is just simply accounting for deposits - no withdrawals - and taking the ending o/s bal as cash return, no individual loans calculation).

However, when I remove the PP effect on the o/s balance of approx $1435.31. ((the difference between "Borrower Principal Amount" of $81435.31 and "Loan Investments (funded)" of $80,000.00)), the resulting XIRR is just 8.26%. The difference is of no surprise to me as I expected that. The month before (2 months in) it was something like 22% vs 4%.

As time goes by, the gap will narrow a lot. My 14+% RAR for my own investment (see post above) of about 3 years have an XIRR of 14.4% and XIRR (with PP removed) of 13.4%. For all these XIRR figures, I simply added back the tax paid to date as a lump sum figure to the o/s balance to enable comparison to Harmoney's RAR.

To provide some background I work in Financial Services (on board as exec), 8 of us are on here and we have a relatively unimportant wager going on for bragging rights whoever can maximise return after 1 year. Our respective accounts are between 4 to 7 months old (mine August). Theres been a degree of conjecture over whether RAR is the most appropriate measure. Hence this discussion.

For your friends portfolio you are doing the right thing if your calc XIRR by stripping the PP. I assume 8.26% is after tax? (Also note - accrued income will also weigh heavy that early).

What I can say, pretty authoratively. Is if your account is a year or under, you should not use XIRR unless you adjust out the PP. Its probably easier to take it out all together. To be more correct use a "back of the fagg packet" earn method, and add back in the earn element pp/50 x m /2 (where pp = the total pp on your active loans, m = months since your first trade). To be pedanticly right you can use that spreadsheet I uploaded(for us our calcs need to be right so we know who is ahead!).

At 2 years, XIRR still won't be quite right. Depending on the amount of Payment Protect and how you are growing your portfolio, your XIRR will be out by between 1 to 3%. Beyond 2 years (assuming you grew your portfolio early and are maintaining the capital), the PP effect should diminish to below 1% (not 100% sure on that as haven't run the stats).

Iin conclusion, simplistically you probably want to use RAR if your under a year - or make the adjustments to XIRR. After one year then you can rely more on XIRR and knock off a few % depending on the age.

[myles]

RAR is a very poor indicator for at least the first 12 months - Harmoney don't provide it until around month 3/4. Have a look at a typical RAR graph...:scared:

[alistar_mid]

To provide some background I work in Financial Services (on board as exec), 8 of us are on here and we have a relatively unimportant wager going on for bragging rights whoever can maximise return after 1 year. Our respective accounts are between 4 to 7 months old (mine August). Theres been a degree of conjecture over whether RAR is the most appropriate measure. Hence this discussion.

For your friends portfolio you are doing the right thing if your calc XIRR by stripping the PP. I assume 8.26% is after tax? (Also note - accrued income will also weigh heavy that early).

What I can say, pretty authoratively. Is if your account is a year or under, you should not use XIRR unless you adjust out the PP. Its probably easier to take it out all together. To be more correct use a "back of the fagg packet" earn method, and add back in the earn element pp/50 x m /2 (where pp = the total pp on your active loans, m = months since your first trade). To be pedanticly right you can use that spreadsheet I uploaded(for us our calcs need to be right so we know who is ahead!).

At 2 years, XIRR still won't be quite right. Depending on the amount of Payment Protect and how you are growing your portfolio, your XIRR will be out by between 1 to 3%. Beyond 2 years (assuming you grew your portfolio early and are maintaining the capital), the PP effect should diminish to below 1% (not 100% sure on that as haven't run the stats).

Iin conclusion, simplistically you probably want to use RAR if your under a year - or make the adjustments to XIRR. After one year then you can rely more on XIRR and knock off a few % depending on the age.

Everyone wants to max return, and when you "trust" harmoney you end up thinking you can model and optimise based on their stats. Thats what you seem to be doing.

Go back through this thread about a year ago under the old version of harmoney by pulling their stats on loan grads, the default rates, the interest all that sort of stuff it was pretty easy to model which loans where the best, a lot of us (I can go back and pull the posts if I really want to) worked out the optimal grade was E (E2, E3, maybe iirc). This is all based off harmoneys stats.

But reality is, and I did raise this issue as a big concern, is all harmoneys stats are probably based on a data set pulled from the last couple of years, years which the economy has been strong, hence default rates maybe artificially low. This comes back to bite you later

So what I ended up doing, is putting together a portfolio about a year ago, with lots of E's - cause according to harmonies stats, when I modeled these, they maximised ROI.

But reality is 16 months in, all that flies out the window when your defaults start sky rocketing. I peaked at 166 E loans which was 13.5% of my portfolio by count, 15.5% by value. Thats a decent sample size. Thusfar my E's are running at 9% default rate. Thats after 16 months. Maybe I just got unlucky, 166 loans is not a massive sample size in the scheme of things

So what i am saying is after a while, my actual performance doesn't seem reconcile with much of harmoney what reports to me. Hence I am skeptical of RAR and more trusting in a simple Xiir of cashflows (with outstanding principle treated as a outgoing cashflow).

[Cool Bear]

Leesal, since you provided your background, I will do the same. I am a semi-retired accountant (by training). Although I got my ACA very early and except for an 18 month period after graduation in the early 80s working for a Chartered Accountant firm, I did not work as an accountant per se. Instead I was with a very big company overseas (revenue in the billions) for many years in various roles. I had been a very early user of spreedsheets - Vision and Symphony in the early 80s, then Lotus 123, even modelling an entire company (a very small subsidiary) on a very large spreedsheet with heaps of "if then else" formulas (within "if then else" formulas).

I can understand where you are going with your spreadsheet. My only observation is that you are taking individual loans and individual transactions in Harmoney for your XIRR calculation instead of an overall simple calculation with the cash and o/s loan balance at the end (adjusted for tax and the total est PP). I am taking the investment in Harmoney as a single investment - so cash flows into Harmoney versus cash out (including end balances). Your method could be interpreted as taking each loan as a separate investment.

Anyway, I dare not try your formulas on my (personal) transaction details page from Harmoney - my latest statement has 470,000 lines on it - as it may crash my old PC. So I will stick to the simpler way of calculating.

As for my friend's investment with the two screenshot above, the 8.26% XIRR at 31/12/17 (3 months) is after adjusting for the PP. It is also before tax, as I added back the total tax deducted as a lump sum on 31/12. If I do not add back tax paid, it is 5.4%.

At 2 months, the adjusted XIRR was 4.2% before tax (ie. adding back tax paid) and 2.7% after tax.

I know the deficiencies of both XIRR and RAR. We had discussed it quite a bit earlier in this thread.

As mentioned above: For my personal investment in Harmoney of about 30 months at 31/12, the RAR is 14.4%, XIRR before tax and including PP is also 14.4% (a coincidence as it is not the same thing). XIRR before tax and taking out PP (estimate) is 13.4%. The difference of 1% is the same as predicted by Harmoney in its PP writeup. But a good portion of my loans are before PP came about. So hopefully the difference for mine will grow closer to 1.5%.

My apologies to those that are bored by XIRR discussion. The main difference is that XIRR is a truer indicator as it takes into account your idle un-invested cash sitting in Harmoney.

[alistar_mid]

I am keen to know what the simple return of the "High Rollers" on this forum that state they have between $80,000 and $110,000 lent through Harmoney Loans.
What is your return on your balance after 6 months, 1 year, 2 years or more. Rather than all this XIRR business.? Surely if you had a steady balance of $100,000 for say 12 months and received $13000 Gross interest including defaults, that would fundamentally be an excellent return.

Maybe leesal does have a point, that I should be valuing my outstanding principle in a different way for my Xirr calc. Cause I'm ~7% (pre tax) on Xirr but harmoney RAR is 14.5%


9417
9418

[RMJH]

Thanks. Realised that I did not fully answer your question.

RAR was
14.57 at 6 mths
13.94 at 1 yr
13.80 at 18 mths
14.33 at 2 yr
14.40 at 30 mths
atm 14.39 at 30+mths

was hoping to get to 15% before version 1.5 came about. Now happy to stay between 14 and 14.5%

Your RAR from your previous posts is higher. Congrats to you too.

I am sitting abut 1% lower than you after about 3 years/6000 loans . I am interested in gaining some understanding of the difference ie due to higher risk adopted or better selection of loans, or a combination. Do you read the stories or just rely on filters? I essentially rely on autolend and filter out all business loans, all loans above $35k and all A's, E's and F's and 25% income ratio. Until 1.5 I also invested in A's and had a roughly equal weighting in each major grade. Any insights would be most welcome.

[permutation]

I have a weekly RAR list from September to January and I have shown the charge-offs along the way. I have ended the RAR with a 4 pip difference at 14.68%

The odd charge-off does not have much impact on my ongoing RAR's, I now have a very stable concentrated loan portfolio in the mid-range grades.

9419

[leesal]

Maybe leesal does have a point, that I should be valuing my outstanding principle in a different way for my Xirr calc. Cause I'm ~7% (pre tax) on Xirr but harmoney RAR is 14.5%



Your outstanding principal for pretax XIRR should be 72,731.85 + 292.83 + 5990.63 = 79015.31

[leesal]

Coolbear.

You certainly must have a solid grasp of systems and s/s, and seen the evolution. Back in those days the data must have taken up a truckload of 5.25" floppy's!

You're right, it is a brute force method. Which is fine with my data, and necessary for me to learn the transaction flow of PP :)
I've now swapped to a one pager... The closing position with heuristic adjustments. It maps out at 13.66%, close enough to 13.79% XIRR generated from working full transactional data. Which am pleased with. Have attached.

Re your friend.. Will be interested to see how he tracks on 1.5 with a portfolio that size. In using XIRR I'd adjust in accrued income (say $60,000 x 15/365 x 20% x (100% - 15%) = $420... But I gather you already know where it'll track.

One question I have you mention you hope the difference grows to 1.5%. When you strip the PP out of your actual portfolio, are you taking off the 4% odd premium pp principal, and estimating the return this provides over and above your baseline? Or something else?

9420

[Cool Bear]

Coolbear.

You certainly must have a solid grasp of systems and s/s, and seen the evolution. Back in those days the data must have taken up a truckload of 5.25" floppy's!

...............

................
One question I have you mention you hope the difference grows to 1.5%. When you strip the PP out of your actual portfolio, are you taking off the 4% odd premium pp principal, and estimating the return this provides over and above your baseline? Or something else?

9420
Yes, those days a 20Mb (not Gb) hard disk was the state of the art for a PC.

The statement that I hope the effect of PP on my investment will hopefully grow near to 1.5% from the present 1% - is just that the effect of all my loans before the PP era will become a smaller percentage of the total as time goes by.

When I calculate my XIRR without the PP, I simply take the difference between "Borrower Principal Amount" and "Loan Investments (funded)" as the PP amount. I know that this is overestimating the PP amount as part of that difference had already been realised from fully and partially paid PP loans. I do not add any accrued income for PP. Mine is just a simple calculation to give me an idea of where I am going. I do not need it to be that accurate. After all, the difference in my calculations for XIRR with and without PP is just 1% at the moment. Refining it will just result in a slightly more accurate figure that is within that 1% range.

[beacon]

But reality is 16 months in, all that flies out the window when your defaults start sky rocketing. I peaked at 166 E loans which was 13.5% of my portfolio by count, 15.5% by value. Thats a decent sample size. Thusfar my E's are running at 9% default rate. Thats after 16 months. Maybe I just got unlucky, 166 loans is not a massive sample size in the scheme of things.

166 is a statistically significant sample size, so have faith in your numbers.

And don't flog yourself buddy. You've done well with E's compared to the Harmoney universe of E's, which are currently at 11.25% default rate approx (they were approx 0.5% less = 10.75% ish, a couple of months ago)

[beacon]

The statement that I hope the effect of PP on my investment will hopefully grow near to 1.5% from the present 1% - is just that the effect of all my loans before the PP era will become a smaller percentage of the total as time goes by.

If Harmoney reckons the net effect of PP is 1% (calculated on with vs without basis), you should cap out near 1% extra, not 1.5%

[alistar_mid]

Your outstanding principal for pretax XIRR should be 72,731.85 + 292.83 + 5990.63 = 79015.31

good point, it being pre tax and all :p

Xirr is now 13.37% lol

[beacon]

You've done well with E's compared to the Harmoney universe of E's, which are currently at 11.25% default rate approx (they were approx 0.5% less = 10.75% ish, a couple of months ago)

But then you've only been in 16 months, and Harmoney universe has been around over double that time. :eek2:

[leesal]

Yes, those days a 20Mb (not Gb) hard disk was the state of the art for a PC.

The statement that I hope the effect of PP on my investment will hopefully grow near to 1.5% from the present 1% - is just that the effect of all my loans before the PP era will become a smaller percentage of the total as time goes by.

When I calculate my XIRR without the PP, I simply take the difference between "Borrower Principal Amount" and "Loan Investments (funded)" as the PP amount. I know that this is overestimating the PP amount as part of that difference had already been realised from fully and partially paid PP loans. I do not add any accrued income for PP. Mine is just a simple calculation to give me an idea of where I am going. I do not need it to be that accurate. After all, the difference in my calculations for XIRR with and without PP is just 1% at the moment. Refining it will just result in a slightly more accurate figure that is within that 1% range.

Thanks Coolbear. That does make a lot of sense. Its good to see we are on the same page, its easy to get confused about PP and what makes it up. (FYI I refer to difference between "borrower principal" and "loan investment (funded)" as "payment protect unfunded".

I find it interesting to look at PP, and break it down. If you take a typical loan say 15% over 36 months - going the full term with PP (say $1.13 on a $25 loan) you get:
1- your base return from the loan itself
2- 0.8% return from the interest element on the PP principal
3- 2.9% return from the "payment protect unfunded"

But if the average PP get 40% through (14 months), before defaulting or repaying early:
- return from payment protect unfunded (3) drops to 1.8%.

Thus ann return% on unfunded in (3), depends on policy length - presumably due to principal repayments increasing as the loan approaches maturity.

Based purely on the difference between XIRR with (3) loaded up front and (3) stripped. You should be able to achieve a 1.5% at somewhere near 30%+ PP. But the true uplift from PP (3) will be on the lower end unless you can somehow get most of your loans through to completion.

[leesal]

So what I ended up doing, is putting together a portfolio about a year ago, with lots of E's - cause according to harmonies stats, when I modeled these, they maximised ROI.

But reality is 16 months in, all that flies out the window when your defaults start sky rocketing. I peaked at 166 E loans which was 13.5% of my portfolio by count, 15.5% by value. Thats a decent sample size. Thusfar my E's are running at 9% default rate. Thats after 16 months. Maybe I just got unlucky, 166 loans is not a massive sample size in the scheme of things


At least your returning 13% though :)

Possibly a dumb question. Is that 9% the ($ write downs) over the ($ investment)?

I've got about 23% in E's & F's. Although real early stages as dollar cost averaging my investment.

[alistar_mid]

At least your returning 13% though :)

Possibly a dumb question. Is that 9% the ($ write downs) over the ($ investment)?

I've got about 23% in E's & F's. Although real early stages as dollar cost averaging my investment.

well when I stated I have 166 E's, that was when I had the max invested, ie my outstanding principle was the highest.

I have now had 207 E's over the course of my investing in harmoney. Some of those are still active, some have been paid off already, and about 10.14% have been written off (I downloaded the csv as per yesterday E writes offs increased from 8.8% - the 9% i quoted, to 10.14%).

So 10.14% of all the E's I have invested in (not current, have invested) have been written off.

Of all the loans I have that have been written off, E's make up 48.84%, despite being 11.81% of what I have invested in.

[myles]

Be careful simply adding total tax paid back to determine XIRR - the result is not the same as having not paid tax - time value of money and all that...depends on what you really want the final figure to be...

[Wsp]

https://www.cio.co.nz/article/632369/ai-helps-harmoney-improve-ability-assess-credit-risk/

[leesal]

https://www.cio.co.nz/article/632369/ai-helps-harmoney-improve-ability-assess-credit-risk/

What the machine will learn when credit conditions change

[leesal]

well when I stated I have 166 E's, that was when I had the max invested, ie my outstanding principle was the highest.

I have now had 207 E's over the course of my investing in harmoney. Some of those are still active, some have been paid off already, and about 10.14% have been written off (I downloaded the csv as per yesterday E writes offs increased from 8.8% - the 9% i quoted, to 10.14%).

So 10.14% of all the E's I have invested in (not current, have invested) have been written off.

Of all the loans I have that have been written off, E's make up 48.84%, despite being 11.81% of what I have invested in.

How much interest have you earned off E's? How does this compare to $ value of E Charge offs?

On 1.0 as long as you're 50% ($ Charge / $ Int ) or less then you are doing fine.

[myles]

Good to see that the early claimed 50% error has waned to a more realistic value and that interest is forming part of the discussion :p

The biggest impact on return, for those in the higher risk grades, comes from defaults that are somewhat unpredictable. Using a more accurate calculation of returns early is pointless (in my opinion) when you start to factor in the 'hazard curve'. With only the data Harmoney provide (which we know is likely to be a bit off) a guesstimate of actual return is the best you can expect - and this is going to be influenced by what's happening out in the real world... Comparing RAR or XIRR (corrected or not), of one set of loans to another that are of a different age, is never going to be a fair comparison... Comparing two mature sets of loans would be 'more fair'...

I'd be interested, leesal, on how you will factor this into your wager - the full impact of a default isn't known until close to 1 year after it actually starts? Since those in your wager have started at different times, any comparison would be somewhat distorted as default rates vary over time and are influenced by the real world? The only accurate comparison would come when Outstanding Principal reaches zero and XIRR (or similar) is used on all in's and out's, but starting at different times has an impact even if the term is set the same?

[leesal]

Good to see that the early claimed 50% error has waned to a more realistic value and that interest is forming part of the discussion :p

The biggest impact on return, for those in the higher risk grades, comes from defaults that are somewhat unpredictable. Using a more accurate calculation of returns early is pointless (in my opinion) when you start to factor in the 'hazard curve'. With only the data Harmoney provide (which we know is likely to be a bit off) a guesstimate of actual return is the best you can expect - and this is going to be influenced by what's happening out in the real world... Comparing RAR or XIRR (corrected or not), of one set of loans to another that are of a different age, is never going to be a fair comparison... Comparing two mature sets of loans would be 'more fair'...

I'd be interested, leesal, on how you will factor this into your wager - the full impact of a default isn't known until close to 1 year after it actually starts? Since those in your wager have started at different times, any comparison would be somewhat distorted as default rates vary over time and are influenced by the real world? The only accurate comparison would come when Outstanding Principal reaches zero and XIRR (or similar) is used on all in's and out's, but starting at different times has an impact even if the term is set the same?

For mature portfolio's yes :)

Its a bit of fun. No-one went too hard out early, besides those first guys think they have the advantage on platform 1. But we do have groundrules over arrears, everything over 60 days gets charged etc.

Regarding survival. Longitudinally 2nd year is on average 30% (iirc) worse then 1st, so I'll extrapolate my position. 14% return now can get screwed in many ways. So certainly not going on a spending spree anytime soon!

Also am dollar cost averaging ... After 18 months, portfolio will be 9 months through the hazard giving higher reported returns. Same thing if you invest mainly in 36 month loans. Some comparability issues there. But take your point, earlier is going to be higher Stn Dev.

[myles]

For mature portfolio's yes :)

Not at all, can happen from day one and does, especially if you buy into the higher risk loans...this has a much greater impact on a younger portfolio's than mature ones? Losses early that blowout over time.

These are also variable across the year, appears to be more significant than most think.

Sounds like you haven't yet factored in the big ticket items that really affect returns.

[leesal]

At the risk of being the odd couple, rewind and start again....


Good to see that the early claimed 50% error has waned to a more realistic value and that interest is forming part of the discussion :p

For mature portfolio's yes :) **(my return on PP = 50%) We're talking about XIRR here and no-one wants that so lets move on **




I'd be interested, leesal, on how you will factor this into your wager - the full impact of a default isn't known until close to 1 year after it actually starts? Since those in your wager have started at different times, any comparison would be somewhat distorted as default rates vary over time and are influenced by the real world? The only accurate comparison would come when Outstanding Principal reaches zero and XIRR (or similar) is used on all in's and out's, but starting at different times has an impact even if the term is set the same?

Its a bit of fun. No-one went too hard out early, besides those first guys (**ie in our wager**) think they have the advantage on platform 1. But we do have groundrules over arrears, everything over 60 days gets charged etc.

**(ie now we're on the whole relatively cool with everything)**


Good to see that the early claimed 50% error has waned to a more realistic value and that interest is forming part of the discussion :p

The biggest impact on return, for those in the higher risk grades, comes from defaults that are somewhat unpredictable. Using a more accurate calculation of returns early is pointless (in my opinion) when you start to factor in the 'hazard curve'. With only the data Harmoney provide (which we know is likely to be a bit off) a guesstimate of actual return is the best you can expect - and this is going to be influenced by what's happening out in the real world... Comparing RAR or XIRR (corrected or not), of one set of loans to another that are of a different age, is never going to be a fair comparison... Comparing two mature sets of loans would be 'more fair'...


Regarding survival (**hazard**). Longitudinally 2nd year is on average 30% (iirc) worse then 1st, so I'll extrapolate my position (**ie take my return after one year, and apply a factor against the defaults, to determine what the return would be. Years 2 and 3 are on average much worse for defaults**). 14% return now can get screwed in many ways. So certainly not going on a spending spree anytime soon!

Also am dollar cost averaging ... After 18 months, portfolio will be 9 months through the hazard giving higher reported returns. Same thing if you invest mainly in 36 month loans. Some comparability issues there. But take your point, earlier is going to be higher Stn Dev.

(** agreeing with you here, that higher risk grades increases variability; length invested will likely suppress return via the hazard curve; pointing out different investment grow early vs grow late even if the same age would be at different stages along the hazard.... while a portfolio of 3 year loans vs portfolio of 5 year loans at 18 months likewise would on average produced very different returns).




can happen from day one and does, especially if you buy into the higher risk loans...this has a much greater impact on a younger portfolio's than mature ones? Losses early that blowout over time.

These are also variable across the year, appears to be more significant than most think.


we agree here, earlier portfolio's will be higher standard deviation. As are DEFs. To reiterate my greatest fear if a recession hits some lower grade portfolio may not produce returns.

[leesal]

This is how tracking charge offs. There are 5 loans in arrears (1 to 30 days), so they get a 20% probability load against them.





units paid
unit arrears
chargeoff %
harm est chg%


A
27
0
0.0%
0.1%


B
220
0
0.0%
0.2%


C
126
0
0.0%
0.6%


D
134
1
1.7%
1.7%


E
71
1
3.4%
4.4%


F
15
3
47.2%
7.6%









Tot
593
5
2.0%
1.3%



Really early days. Though not good signs on F grade.

[permutation]

This is how tracking charge offs. There are 5 loans in arrears (1 to 30 days), so they get a 20% probability load against them.





units paid
unit arrears
chargeoff %
harm est chg%


A
27
0
0.0%
0.1%


B
220
0
0.0%
0.2%


C
126
0
0.0%
0.6%


D
134
1
1.7%
1.7%


E
71
1
3.4%
4.4%


F
15
3
47.2%
7.6%









Tot
593
5
2.0%
1.3%



Really early days. Though not good signs on F grade.

Here are some long term stats from my 34 months in the Harmoney "Universe";


E Grades taken 71- Charged off 11 = 15.49%
F Grades taken 30- Charged off 5 = 16.67%




Total E&F Grades to date 101- Charged off 16= 15.84%
Total A>D Grades to date 1560 - Charged off 14= 0.8974%
Note: This default rate is across 34 months. Harmoney's forecast defaults are p.a.


9423

[myles]

How are you dollar cost averaging i.e. selection? (everything)

One point that wasn't covered in previous discussion is that Payment Protect return varies with interest rate. [one reason why you can't generalise across portfolio's]


Years 2 and 3 are on average much worse for defaults

? that doesn't match the Harmoney supplied Hazard Curve ?

[leesal]

Here are some long term stats from my 34 months in the Harmoney "Universe";


E Grades taken 71- Charged off 11 = 15.49%
F Grades taken 30- Charged off 5 = 16.67%




Total E&F Grades to date 101- Charged off 16= 15.84%
Total A>D Grades to date 1560 - Charged off 14= 0.8974%
Note: This default rate is across 34 months. Harmoney's forecast defaults are p.a.


9423

Impressive charge off stats. Better then Harmoney's default scorecard! Currently Grade F is maximising your return (even if a small sample size)?

[leesal]

? that doesn't match the Harmoney supplied Hazard Curve ?

Harmoney's Hazard curve is from origination of missed payment, not the date it gets charged.... They are 5 months ahead of where they should be.

9425




One point that wasn't covered in previous discussion is that Payment Protect return varies with interest rate. [one reason why you can't generalise across portfolio's]



PP only forms 4% of the capital on a loan, the interest affect is a bonus but too significant. One could argue the moral hazard on higher risk grades of PP invoked makes it less attractive there.



How are you dollar cost averaging i.e. selection? (everything)

I'm investing a few grand a month to a horizon of 3 or 4 years and spreading them through the middle grades. Am autofiltering on specific criteria (capture rate probably less then 10%).

[myles]

Harmoney's Hazard curve is from origination of missed payment, not the date it gets charged.... They are 5 months ahead of where they should be.

Seems an odd way to look at it if you want to predict current value of portfolio - no money to be made from first missed payment point and principal inflated for that period? So pedantic about PP but ignoring the big things? That graph isn't representative of what Harmoney stats. show?


One could argue the moral hazard on higher risk grades of PP invoked makes it less attractive there.
I'd argue the opposite => more attractive i.e. bigger return. (? moral ? - not sure how PP is, the risk grade indicates exactly that, not PP?)


I'm investing a few grand a month to a horizon of 3 or 4 years and spreading them through the middle grades. Am autofiltering on specific criteria (capture rate probably less then 10%).

Okay, must have different definitions of dollar cost averaging.

[Cool Bear]

I am sitting abut 1% lower than you after about 3 years/6000 loans . I am interested in gaining some understanding of the difference ie due to higher risk adopted or better selection of loans, or a combination. Do you read the stories or just rely on filters? I essentially rely on autolend and filter out all business loans, all loans above $35k and all A's, E's and F's and 25% income ratio. Until 1.5 I also invested in A's and had a roughly equal weighting in each major grade. Any insights would be most welcome.
RMJH, it is very difficult to see what works and what does not. Last year, I started analysing my 2016 loans as a group. The idea is so that new loans do not affect the analysis. Also my investment criteria change as time goes by but did not for that year. Harmoney's interest rates also did not changed for those 12 months as well. The objective was to see what grades gave me the best returns. I started tracking that result as each month goes by in 2017. That analysis is now worthless with Harmoney version 1.5 as a borrower who qualify under say C3 previously may not be assigned the same grade under V1.5.

Most of my loans now are via Autolend (B to E) so I do not get to read the stories before the loans are committed. With the manually done loans, I do glance at their stories (borrower's comments). However, income ratio and grades are still more important. I do loan to all grades A to F manually. With manual loans, marital status also affects my decision a bit as "divorce" and "separated" complicates life for the borrowers. I do not spend much time on deciding, most manual loans will take me about 2 to 3 seconds and at the very most 10 (very rarely).

[leesal]

Seems an odd way to look at it if you want to predict current value of portfolio - no money to be made from first missed payment point and principal inflated for that period?

Hence as above applying 20% charge off against arrears 1-30 days... etc

I'd be interested to hear what you are doing in this space?


? moral ?

Moral Hazard - its an insurance term. The more dubious the policyholders credentials, the higher the cost from moral hazard.


different definitions of dollar cost averaging.

Its quite a basic investment concept. Just google. If you've are paying into kiwisaver you are already dollar-cost-averaging.

[myles]

I'd be interested to hear what you are doing in this space?

I've covered what I do/have done a while back - the most basic was to write of any portion in arrears over 31 days - at the time I prefered to over estimate losses (still do). I still track that so I know if a big hit is likely to come through - but I'm not seeing this is really necessary, but nice to have. With over 100K, defaults, at the current rate I'm getting them, are looking stable. I'm expecting some growth in defaults but predict compounding will keep up with it at the very least. If that changes I'll see it coming.

I'm in a unique situation that I've invested 100K quite quickly (3-4 months) and have not withdrawn, so I'm getting quite a good picture of what's going on without being tainted by deposits/withdrawals. I'm surprised at, what is currently, a rock steady straight line of growth. Perhaps I've just hit on a reasonable loan selection process and range? [I gave up trying to get an accurate figure when the new rates etc. came in - not worth the effort for me - started up another account to be a little more conservative, but have pretty much fallen back to the same as my original account as it's doing well and looks like the sweet spot I'm after and still fit's with the new rates].

One thing I did in the lead up to Christmas was to tighten up my selection process as it's been shown that P2P is similar tos Credit Card default rates - this period being a higher default rate period. This has created a bit of a 'wobble' as I couldn't match enough loans and my available principle crept up to >10K (it comes back quickly!), working on getting most of it back in now. It is a finicky beast, with so many influences...


Moral Hazard - its an insurance term. The more dubious the policyholders credentials, the higher the cost from moral hazard.

Aware of what it means - not sure how PP at a lower rate, is different from PP at a higher rate, hence my query.


Its quite a basic investment concept. Just google. If you've are paying into kiwisaver you are already dollar-cost-averaging.

Aware of the term, doesn't seem to match what you are doing i.e. investing in whatever comes along vs what you've indicated - that you are quite selective...

[beacon]

units paid
unit arrears
chargeoff %
harm est chg%


A
27
0
0.0%
0.1%


B
220
0
0.0%
0.2%


C
126
0
0.0%
0.6%


D
134
1
1.7%
1.7%


E
71
1
3.4%
4.4%


F
15
3
47.2%
7.6%









Tot
593
5
2.0%
1.3%





Your "harm est chg%" figures differ from Harmoney stats a bit leesal, more than rounding down to 1 decimal place should. Eg., In Harmoney supplied stats, F charge-off averages out at 8.06% in v1.5, not at 7.6%. Where are you sourcing yours from?

[alistar_mid]

just did some number crunching on profitability by loan type for my portfolio.

its all in the attached excel file, everything’s hard coded except the most recent date which is linked to a csv download, so people can critique the formulas / logic. (yep I could do it with pivot tables but i like sumifs)

so profit and loss for me is pretty straight forward, I claim write offs and fees, so for me its gross interest less fess less writes offs = gross profit, less tax = net profit.
So for each grade I have a net profit.

The profitability is harder to work out. Obviously it’s the profit / investment for each grade.

However I have chucked money in at different times and chosen loans at different times. So how I have done this is worked out an average length of loan, which you can get by taking for all the loans in status arrears or current, by taking their loan term less payments remaining. This should give the term the loan has been “active”. You get a total months figure for each loan grade, and then you divide by loan counts to get the average length of loan.

Then to work out average investment, I have summed amount invested, and scaled it by average loan length, to annualise it. For example I have dropped $11,300 into A’s over the life of my portfolio, the average length of an active A is 8.62 months, so to annualise or weighted average the amount I have invested in A’s to get an annualised return, its $11,300 * (8.62/12) = $8,133

A’s have made me a net profit of $464 (this is from the life of my portfolio) so the roi on A’s is $464 / $8,133 = 5.70%.

I’m not sure of the logic. The profit and loss is reflective of the life of my portfolio, which is 16 months. When working out the average amount invested, I’m trying to annualise it.

Not sure it matters too much, the results will be the same, D’s are best for me, followed by C’s.

.9431


hmm it appears I can;t share my spreadsheet

[beacon]

so people can critique the formulas / logic.... hmm it appears I can;t share my spreadsheet

Interesting concept Alistar. Segregating and analysing v1.5 only loans (rather than your to-date totals) might provide you purer insights by grade and be more useful. :)