Harmoney

[Pipi]

I see (for the first time today and I have been looking regularly) that 2 loans are available. Both 99% full. Token ones in my opinion. Keep the small fry happy.

But is it keeping the small fry happy. I have not had an autoloans since 17th Dec. Then when they opened up the number of notes you could get on an autoloan I am struggles to even get any manually. My available cash is building up. I had a 10 year plan on what I was going to invest in harmoney. Now I am very disheartened , and starting to change my mind and thinking of withdrawing my money as it comes available.

[Saamee]

But is it keeping the small fry happy. I have not had an autoloans since 17th Dec. Then when they opened up the number of notes you could get on an autoloan I am struggles to even get any manually. My available cash is building up. I had a 10 year plan on what I was going to invest in harmoney. Now I am very disheartened , and starting to change my mind and thinking of withdrawing my money as it comes available.

Do look at both Lending Crowd and Squirrel...... Very good alternatives :)

[777]

But is it keeping the small fry happy. I have not had an autoloans since 17th Dec. Then when they opened up the number of notes you could get on an autoloan I am struggles to even get any manually. My available cash is building up. I had a 10 year plan on what I was going to invest in harmoney. Now I am very disheartened , and starting to change my mind and thinking of withdrawing my money as it comes available.

Pity I can't transfer my loans to you. Whittled down from $40,000 to $4,000 as I withdraw as fast as I can manage.

[BJ1]

There are two distinct issues at play here. One is whether P2P lending is an emotional or logical process. If the former, then don't be involved. If the latter then are the net returns generated consistent with Harmoney's projections - and what I see in this forum is that most participants are doing better than the platform and therefore better than Harmoney projects. The wholesale lenders are taking on the higher risk rubbishy stuff which is why their RAR is so far below retail (and lately dropping every time it is recalculated - perhaps a function of a shortage of D & E grade loans?).
The second issue is whether the default recovery process is being adequately handled. How would we know, because there is no information provided as to why defaults have occurred, what is being done, or anything. How come loans to homeowners don't result in recoveries (which seems to be the case applying the percentages of these borrowers I see)? We may not be secured but surely the legal process should result in a recovery?
But overall, why get out of a good return investment with good spread of risk just because it is time consuming to keep fully invested - the alternatives aren't that great. For those investors around $40k in, try taking larger chunks than 4 notes - your risk spread will allow double that easily.

[Halebop]

...The wholesale lenders are taking on the higher risk rubbishy stuff which is why their RAR is so far below retail (and lately dropping every time it is recalculated - perhaps a function of a shortage of D & E grade loans?)...


Hi BJ1, I suspect this isn't quite right. As an investor biased towards "rubbishy" loans (10% B, 35%+ C & D Respectively and 15% E) my 2 years returns are higher than system by a good deal (almost 17%pa), hopefully an appropriate compensation for higher risk (but the real test will be performance during a recession!)

Wholesale investors incur a different fee structure and I think you may find it is A & B loans that are driving their weighted returns, not E&F (Look at the Harmoney stats page, there aren't high volumes of these higher risk loans anyway, 50% of volumes share A&B loans, only 10% are E&F).

[Pipi]

Do look at both Lending Crowd and Squirrel...... Very good alternatives :)

Yes I am with Lending crowd also, so may start transfering money to them.

[icyfire]

And here it was me thinking that E & F loans were the rubbishy loans. Perhaps I need to reevaluate my strategy without getting too greedy!

[BJ1]

[QUOTE=Halebop;658654]Hi BJ1, I suspect this isn't quite right. As an investor biased towards "rubbishy" loans (10% B, 35%+ C & D Respectively and 15% E) my 2 years returns are higher than system by a good deal (almost 17%pa), hopefully an appropriate compensation for higher risk (but the real test will be performance during a recession!)............

My bad. I meant that the wholesale investors are picking up the remainder after retail has picked the best loans out of the pool - so wholesale gets higher losses, but perhaps not. Agree though, that with low volumes wholesale will be picking up more A & B which also drives their return down.

I do wonder why any retail investor would want F Grade when E is available as after Harmoney fees and projected default the net return on all F grades is less than E5 (and F5 is less than D1)

[mlt322]

$720 written off, $4 recovered, $141 in arrears on $28k invested. Still have an RAR of 15.61%

[mlt322]

Hi everyone, it's been a while since I showed my face around here but I see discussion is still alive and well.

Some time back, one of the members developed an app that would email details of new loans coming onto the Lending Crowd market which I subscribed to until LC developed this facility for themselves (good on you LC).

I seem to recall that this service was available for Harmoney loans too but now I can't find the website to set it up. If it's still available, could you please let me know who to contact. Thanks muchly in advance.

[Saamee]

Hi everyone, it's been a while since I showed my face around here but I see discussion is still alive and well.

Some time back, one of the members developed an app that would email details of new loans coming onto the Lending Crowd market which I subscribed to until LC developed this facility for themselves (good on you LC).

I seem to recall that this service was available for Harmoney loans too but now I can't find the website to set it up. If it's still available, could you please let me know who to contact. Thanks muchly in advance.

The creator of the service posted this just yesterday on the LC thread....

http://www.sharetrader.co.nz/showthread.php?10456-LendingCROWD-NZ-P2P&p=658477&viewfull=1#post658477

[Investor]

[QUOTE=Halebop;658654]Hi BJ1, I suspect this isn't quite right. As an investor biased towards "rubbishy" loans (10% B, 35%+ C & D Respectively and 15% E) my 2 years returns are higher than system by a good deal (almost 17%pa), hopefully an appropriate compensation for higher risk (but the real test will be performance during a recession!)............

My bad. I meant that the wholesale investors are picking up the remainder after retail has picked the best loans out of the pool - so wholesale gets higher losses, but perhaps not. Agree though, that with low volumes wholesale will be picking up more A & B which also drives their return down.

I do wonder why any retail investor would want F Grade when E is available as after Harmoney fees and projected default the net return on all F grades is less than E5 (and F5 is less than D1)

Retail investors with a significant amount of capital don't get to choose a filter or even loan grades, Harmoney invests the funds across the platform for the client. It's likely to be the same for commercial investors.

[icyfire]

While a low repayment ratio may indicate that a loan may be easier to service the borrower may have other debt. As such when a borrower takes an additional loan with a low repayment ratio it may in effect be a high repayment ratio when considered along with all their other debt payments. Ie the borrower may be using 30% of their income to service debt and an additional loan through harmoney which only requires 5% of their income to service in effect takes them to 35%. But as lenders we don't know this.
HM should display the borrower's monthly outgoings like LC does.

[mlt322]

Thanking you :)

[alistar_mid]

There are two distinct issues at play here. One is whether P2P lending is an emotional or logical process. If the former, then don't be involved. If the latter then are the net returns generated consistent with Harmoney's projections - and what I see in this forum is that most participants are doing better than the platform and therefore better than Harmoney projects. The wholesale lenders are taking on the higher risk rubbishy stuff which is why their RAR is so far below retail (and lately dropping every time it is recalculated - perhaps a function of a shortage of D & E grade loans?).
The second issue is whether the default recovery process is being adequately handled. How would we know, because there is no information provided as to why defaults have occurred, what is being done, or anything. How come loans to homeowners don't result in recoveries (which seems to be the case applying the percentages of these borrowers I see)? We may not be secured but surely the legal process should result in a recovery?
But overall, why get out of a good return investment with good spread of risk just because it is time consuming to keep fully invested - the alternatives aren't that great. For those investors around $40k in, try taking larger chunks than 4 notes - your risk spread will allow double that easily.

yeah I do 8 notes now on a lot of loans

[Cool Bear]

yikes! reach a milestone I rather not have. 100 defaults. 21months in, 4300+ loans in total with a bit less than 3000 active. The rest paid off.

[Pipi]

You are so right BJ1, it has made me re-think, and put a bit more effort in. Was just a bit frustrated as things were working so well, now they are not. Every time I log in, all loans seem to be gone. Will just have to try a few more times a day. Cheers

[alistar_mid]

yikes! reach a milestone I rather not have. 100 defaults. 21months in, 4300+ loans in total with a bit less than 3000 active. The rest paid off.

whats your average notes per loan?

Are you more weighted the D-F end?

[Cool Bear]

whats your average notes per loan?

Are you more weighted the D-F end?
No, initially more weighted to A and B. now about even A to D with lesser E and F. Minimal notes.

[nztyke]

yikes! reach a milestone I rather not have. 100 defaults. 21months in, 4300+ loans in total with a bit less than 3000 active. The rest paid off.

More important than the number, what percentage of your gross interest has been written off?

[Cool Bear]

More important than the number, what percentage of your gross interest has been written off?
That is a very good question.

19.9% before taking recoveries into account and 19.5% net of recoveries. Based on Harmoney estimates, should only be 11.07%. So Harmoney's estimates are a bit low.

How about yours? actual vs estimate? and how many months have you been in?

[permutation]

Have done a few permutations of my account. Been in 23 months with 1000+ loans invested, my (Charge-offs $ amount v Gross interest) is 12.1297%, but when I add net payment protect fees outstanding, that reduces the loss to 4.6964%. My ($Loss v Outstanding Principal including net PP Fees) today is 0.7882%.
I have had only 2 Charge-offs from Grades A1-D5 inclusive the other 11 from E and F, hence I now avoid lending for these grades.

[nztyke]

That is a very good question.

19.9% before taking recoveries into account and 19.5% net of recoveries. Based on Harmoney estimates, should only be 11.07%. So Harmoney's estimates are a bit low.

How about yours? actual vs estimate? and how many months have you been in?

I have been in since January 2015. Net write offs are running at 5.9% of gross income but my portfolio is probably more conservative; 77% A and B, 16% C and only 7% in the rats and mice. RAR is 12.65% with which I am more than happy. I usually invest 12 notes in A, 8 in B, 4 in C and 2 in the rest.

[Cool Bear]

I have been in since January 2015. Net write offs are running at 5.9% of gross income but my portfolio is probably more conservative; 77% A and B, 16% C and only 7% in the rats and mice. RAR is 12.65% with which I am more than happy. I usually invest 12 notes in A, 8 in B, 4 in C and 2 in the rest.
Yes, I supposed comparing defaults percentages does not mean that much if we do not take into account the risk spread. Mine had definitely a higher risk profile than yours, thus more defaults. But then my RAR is also higher at just around 14% and I am trying to edge it closer to 15%. The increased fees last year is not helping. Overall, like you, I am happy with the investment.

[Cool Bear]

Kudos to Harmoney for the new RAR by unique loans chart in their market stats. Put your cursor over any dot and it will tell you the number of unique loans that investor has and his/hers RAR - eg the one with 10904 loans at 20 Feb has an RAR of 13.81%. Well done to that person.

Well done too to the one with 4468 loans and RAR 16.59%. I presume anyone with more than 4000 loans will have to be invested for more than 18 months - when the defaults starts to stabilise and evens out. In the first 9 months, the defaults are not really representative and the RAR may be higher than it will eventually be. This is assuming that one stays invested and adds to the investment over time as oppose to an investor that put in one lump sum at the beginning and hardly anymore thereafter.

[Investor]

HM should display the borrower's monthly outgoings like LC does.

Very good point.

[CageyB]

Has anyone worked out what the current autolend threshold is? For a long time I was sitting at 3-4% of my total principal in available funds and autolend never invested anything. I recently added funds to go up to 8%, and no autolend investments so far. I do have some filters on, but I would expect something to go through.

[Investor]

Has anyone worked out what the current autolend threshold is? For a long time I was sitting at 3-4% of my total principal in available funds and autolend never invested anything. I recently added funds to go up to 8%, and no autolend investments so far. I do have some filters on, but I would expect something to go through.

There is no threshold. It is subject to change frequently. It would depend on how many people have a higher ratio of available funds to outstanding principal as well as borrower demand etc. So you're definitely not going to get a specific figure from anyone.


I found 1-2 months ago when I assisted someone I know invest in Harmoney they managed to get thousands of dollars in within less than a month through Autolend and it has since slowed dramatically around the high 2% mark. 60 month loans are EXTREMELY easier to get Via AutoLend in comparison to 36 month loans. We are talking probably 50-100x.

[RMJH]

Has anyone worked out what the current autolend threshold is? For a long time I was sitting at 3-4% of my total principal in available funds and autolend never invested anything. I recently added funds to go up to 8%, and no autolend investments so far. I do have some filters on, but I would expect something to go through.
I am finding autolend seems to just hold my loan investments with just over 8% cash. I am finding it impossible to grow my portfolio now because the loans come and go so quickly. I have upped the number of notes per loan but not changed the filters. I might try putting more cash in and see if that gets me more loans.

[CageyB]

There is no threshold. It is subject to change frequently. It would depend on how many people have a higher ratio of available funds to outstanding principal as well as borrower demand etc. So you're definitely not going to get a specific figure from anyone.


I found 1-2 months ago when I assisted someone I know invest in Harmoney they managed to get thousands of dollars in within less than a month through Autolend and it has since slowed dramatically around the high 2% mark. 60 month loans are EXTREMELY easier to get Via AutoLend in comparison to 36 month loans. We are talking probably 50-100x.

Of course it's a moving target, but with a sufficiently large number of investors in the system, at any given time it should be fluctuating around a certain band, right? (For example, 5%-6%). My only filters are "no Fs" and, importantly, "36 month loans only". I don't know if I'll be in NZ in 5 years and there's no secondary market on Harmoney, which is limiting. I'll give that some more thought.

[Art]

I see that the Feb statements are now available. I don't know why they include all data from when you first opened the account each month - the second page of my statement is now over 82,000 lines of data! I would be happy if they just held detailed data from the latest month with totals only coming from the previous month. Perhaps then they would be quicker to produce and could be made available a bit sooner after end of month?

[Investor]

Of course it's a moving target, but with a sufficiently large number of investors in the system, at any given time it should be fluctuating around a certain band, right? (For example, 5%-6%). My only filters are "no Fs" and, importantly, "36 month loans only". I don't know if I'll be in NZ in 5 years and there's no secondary market on Harmoney, which is limiting. I'll give that some more thought.

Fair point. Yeah I'm in the same position as you (deciding whether or not to take the plunge into 60 month loans). It seems people who are investing in 60 month loans are also having significant trouble in investing additional funds.

[Wsp]

My auto lend has been kicking in at around 7 or 8%.

[CageyB]

Cool, yes, I finally got my first auto-lend loan since December after taking mine up to 8%. It is kind of awkward, because while the Harmoney yields are great they're inflated by the fact that you have to have 8% of your money earning zero interest (albeit liquid and available for withdrawal) at any given time to continue investing, as manually investing it is very difficult.

[icyfire]

Cool, yes, I finally got my first auto-lend loan since December after taking mine up to 8%. It is kind of awkward, because while the Harmoney yields are great they're inflated by the fact that you have to have 8% of your money earning zero interest (albeit liquid and available for withdrawal) at any given time to continue investing, as manually investing it is very difficult.
Sounds like another potential revenue stream for Harmoney!

[Cool Bear]

Wow, if everyone is at 8%, it means Harmoney has access to $18M (8% of $233M current loans at 20 Feb as per their market stats) without having to pay interest. That is a lot of dough!

[Bjauck]

Wow, if everyone is at 8%, it means Harmoney has access to $18M (8% of $233M current loans at 20 Feb as per their market stats) without having to pay interest. That is a lot of dough! They should really calculate the investor RAR on the money investors have in the platform - including the money in the platform, sitting in investors' accounts earning 0% interest.

[permutation]

Wow, if everyone is at 8%, it means Harmoney has access to $18M (8% of $233M current loans at 20 Feb as per their market stats) without having to pay interest. That is a lot of dough!

From The Harmoney website Q+A~

[kiwi_on_OE]

If I interpret their data correctly, Harmoney lends about 500k/day, and the autolend volume is about 70k/day. So autolending is only 14% of total lending. By manipulating/setting the autolending limit they are effectively keeping everyone's (or the average) cash at about 8%. Interesting. If they increased the 14% to 15% then over time our cash would decrease.

[RMJH]

They should really calculate the investor RAR on the money investors have in the platform - including the money in the platform, sitting in investors' accounts earning 0% interest.
So what we will arrive at in time is a market rate of interest being a blend of zero and loan portfolio rate. Pity the benefit couldn't be passed onto borrowers which after all was one of the key points of P2P.

[myles]

Not sure how this can be attributed to Harmoney. I suspect it's simply due to excessive investors relying on Auto-Lend with criteria too tight and perhaps to many with high Funds Available due to lack of loan availability. Has anyone actually seen a loan that meets their Auto-Lend criteria not be picked up?

I'm new to Harmoney, but haven't been running a high Funds Available to Outstanding Principle ratio (until the last 2 days) and had picked up 18 Auto-Lends in 8 days. Having recently put in significant funds (higher ratio) I haven't seen any obvious change to Auto-Lend pickup rates.

I've had lots of time to monitor loans as they come in and cherry pick the ones that 'feel' right to me outside of my Auto-Lend criteria. None that I've seen that match my Auto-Lend criteria have not been automatically picked up. Currently at just over 80 loans typically 2 or 4 notes each. I have seen (or rather didn't see) one loan get picked up by my Auto-Lend criteria that never showed up - refreshing every minute - in the Browse loans area.

I don't restrict to 36 mth terms (to me 60 mth term loans offer better value on paper as the additional 24 mths is not the danger zone). A smaller number of available 36 mth term loans and a large number of Auto-Lend criteria set with that option is going to result in limited pickups. Nothing sinister here I don't think...

If Harmoney weight Auto-Lend based on Funds Available to Outstanding Principle ratio, which is actually a sensible/fair way to do it, then the issue is more to do with too many Lenders holding too much Funds Available in their accounts. Using this method, Harmoney are trying to reduce the higher ratios, not increase them.

At the end of the day it doesn't matter how they do it, what Available funds are in the total system won't change if there are no outstanding loans...

[Investor]

Not sure how this can be attributed to Harmoney. I suspect it's simply due to excessive investors relying on Auto-Lend with criteria too tight and perhaps to many with high Funds Available due to lack of loan availability. Has anyone actually seen a loan that meets their Auto-Lend criteria not be picked up?

I'm new to Harmoney, but haven't been running a high Funds Available to Outstanding Principle ratio (until the last 2 days) and had picked up 18 Auto-Lends in 8 days. Having recently put in significant funds (higher ratio) I haven't seen any obvious change to Auto-Lend pickup rates.

I've had lots of time to monitor loans as they come in and cherry pick the ones that 'feel' right to me outside of my Auto-Lend criteria. None that I've seen that match my Auto-Lend criteria have not been automatically picked up. Currently at just over 80 loans typically 2 or 4 notes each. I have seen (or rather didn't see) one loan get picked up by my Auto-Lend criteria that never showed up - refreshing every minute - in the Browse loans area.

I don't restrict to 36 mth terms (to me 60 mth term loans offer better value on paper as the additional 24 mths is not the danger zone). A smaller number of available 36 mth term loans and a large number of Auto-Lend criteria set with that option is going to result in limited pickups. Nothing sinister here I don't think...

If Harmoney weight Auto-Lend based on Funds Available to Outstanding Principle ratio, which is actually a sensible/fair way to do it, then the issue is more to do with too many Lenders holding too much Funds Available in their accounts. Using this method, Harmoney are trying to reduce the higher ratios, not increase them.

At the end of the day it doesn't matter how they do it, what Available funds are in the total system won't change if there are no outstanding loans...

I've just invested in my first 60 month loans :) I'm sure it will be significantly easier to invest through Harmoney now. Also I agree with your comments. There have been plenty of complaints from people about how long it is taking for their money to be invested, it is just a matter of demand vs supply.

[myles]

8774

I think the graph tells the story of 36 mth vs 60 mth availability... I've not used it as a criteria i.e. picking either without bias, so the difference shown is likely to be somewhat representative of just how many 36 mth loans are actually available...

I don't take many/any low interest A Grade loans, so there could be a few more 36 mth loans in that range?

[permutation]

8774

I think the graph tells the story of 36 mth vs 60 mth availability... I've not used it as a criteria i.e. picking either without bias, so the difference shown is likely to be somewhat representative of just how many 36 mth loans are actually available...

I don't take many/any low interest A Grade loans, so there could be a few more 36 mth loans in that range?

You might find that the 36/60 month graph may not be accurate. From my live loans, my real figure is 35% of loans are 36 months. The graph shows 25%.
Even the grades graph is not quite accurate either.

When I extrapolate the proportions to my all time loans it doesn't show correctly either.

Harmoney do not state on any of the graphs they provide whether it's live loans data or All time loans data. Because of the high repayment ratio, mine currently 36% of loans repaid, it can make a big difference to the displayed graphs.

[myles]

8775
I've been pulling data into a spreadsheet to do my own numbers. The graph above is actual minus about $650 sitting in Funding Balance (weekend). Looks very similar to me.

The point is the same, if you have Auto-Lend set to only select 36 mth term loans, you're not going to get many...

[permutation]

8775
I've been pulling data into a spreadsheet to do my own numbers. The graph above is actual minus about $650 sitting in Funding Balance (weekend). Looks very similar to me.

The point is the same, if you have Auto-Lend set to only select 36 mth term loans, you're not going to get many...

Did you know that you can only select 36 month or 60 month max term in Auto-lend but not both.

So to get both, you just deselect the max. term filter, so by default you get both. You can check it in the orders section the next time you have a successful Auto-Lend Loan.

~

[myles]

Yeah, good point. It's not a matter of turning 60 mth term on, but removing the criteria all together :t_up: assuming you want both.

[kiwi_on_OE]

Not sure how this can be attributed to Harmoney. I suspect it's simply due to excessive investors relying on Auto-Lend with criteria too tight and perhaps to many with high Funds Available due to lack of loan availability. Has anyone actually seen a loan that meets their Auto-Lend criteria not be picked up?

I'm new to Harmoney, but haven't been running a high Funds Available to Outstanding Principle ratio (until the last 2 days) and had picked up 18 Auto-Lends in 8 days. Having recently put in significant funds (higher ratio) I haven't seen any obvious change to Auto-Lend pickup rates.

I've had lots of time to monitor loans as they come in and cherry pick the ones that 'feel' right to me outside of my Auto-Lend criteria. None that I've seen that match my Auto-Lend criteria have not been automatically picked up. Currently at just over 80 loans typically 2 or 4 notes each. I have seen (or rather didn't see) one loan get picked up by my Auto-Lend criteria that never showed up - refreshing every minute - in the Browse loans area.

I don't restrict to 36 mth terms (to me 60 mth term loans offer better value on paper as the additional 24 mths is not the danger zone). A smaller number of available 36 mth term loans and a large number of Auto-Lend criteria set with that option is going to result in limited pickups. Nothing sinister here I don't think...

If Harmoney weight Auto-Lend based on Funds Available to Outstanding Principle ratio, which is actually a sensible/fair way to do it, then the issue is more to do with too many Lenders holding too much Funds Available in their accounts. Using this method, Harmoney are trying to reduce the higher ratios, not increase them.

At the end of the day it doesn't matter how they do it, what Available funds are in the total system won't change if there are no outstanding loans...

If I got my numbers right, then Harmoney aren't putting much of the money through auto-lending (14%), if they increased the auto-lending then our average cash balance would decline.

When I see unfulfilled loans, I have seen loans that match my auto-lend criteria and to which I have not auto-lent any money.

[myles]

How did you get the 14%?

That figure doesn't match with what I've experienced in the short time I've been involved.

[Investor]

How did you get the 14%?

That figure doesn't match with what I've experienced in the short time I've been involved.

That 14% is the percentage of loans funded via Auto Lend, not the percentage of available cash required.

[myles]

Just read your previous post about how you got 14%. Your numbers are wrong in my opinion.

You make the assumption that all loans should be picked up by Auto-Lend - unless everyone has no criteria set, and everyone actually has auto-lend turned on, this can't happen! At a guess I would say that less than 14% of loans that go through match my criteria - this has nothing to do with Harmoney setting a percentage of Auto-Lend fulfilment.

As I said, I've not seen any loans that match my Auto-Lend criteria not get picked up - acknowledging that I've not been involved long, but have been watching loans closely because I have the time at the moment. I would be surprised if Harmoney have this set much below 100% (if it's not set at 100%)!

From Harmoney - How it Works:

"Loans go through the Auto-Lend engine before they hit the Marketplace. This means that users of Auto-Lend do get priority over manual lending in the Marketplace. However, the percentage of each loan that can be fulfilled with auto-lend can be set to less than 100%. Harmoney will set it based on the demand for Auto-Lend vs manual lending."

Bold added - makes logical sense to me.

And from a blog post:

"Here’s the key takeaway: you won’t always get a note in every loan that meets your criteria. When only a certain percentage of each loan can be filled with Auto-Lend notes, and a significant proportion of our Lender database using Auto-Lend, there aren’t always enough notes available in the loan to enable such a spread.But there’s a compounding factor here that many of the general public aren’t entirely aware of:"

Which goes on to highlight peaks and troughs due to timing e.g. holiday periods etc.

I really don't see low Auto-Lend pickups being driven by Harmoney - I believe it's driven by Lenders themselves.

[permutation]

..... I would be surprised if Harmoney have this set much below 100% (if it's not set at 100%)!....

I have observed that when most loans hit the market place they are about 13-15% full. So I assume they have been through the Auto-Lend allocator and are then available for general investment.

Harmoney have a priority order based on Cash v Principal outstanding. Any loan set at 100% would never appear in the market place.

I have been in a long time, have had many loans in my Auto-Lend filter that I did not get notes allocated, but these came into the marketplace about 15% allocated.

I did a test recently and added enough cash to bring my ratio up to 18% ($ Bal. v Principal outstanding) but I still missed out on loans that appeared in my Auto-Lend filter.

The problem as I see it; since Harmoney removed the limit on the number of notes that could be applied for in Auto-Lend from 4 to unlimited, some investors ask for many notes.

I have even read on this forum some guy complaining that he couldn't get 30+ notes he applied for.

Loans are now filled manually within seconds of hitting the marketplace. There are several thousand retail lenders now, so there is not enough to go around!

[myles]

I have observed that when most loans hit the market place they are about 13-15% full. So I assume they have been through the Auto-Lend allocator and are then available for general investment.

I've seen only a small number in this range, most that I've seen are in the 80-90% full range when they appear in the market. As I've previously said I've seen one that was picked up by Auto-Lend that never got to the market i.e. 100% allocation.

Harmoney do indicate that they "dynamically manages the proportion of loans that can be funded by auto-lend based on Lender demand and loan flow" and that the Auto-Lend fulfilment will be set "based on the demand for Auto-Lend vs manual lending.", so perhaps there is significant variance in this - it could be driven by the number of Lenders currently logged in (i.e. an indication of manual lending?), so could vary based on the time of day etc. Just guessing here...


Harmoney have a priority order based on Cash v Principal outstanding. Any loan set at 100% would never appear in the market place.

Assuming you mean 100% Auto-Lend fulfilment, then yes it could appear in the market place, if there aren't enough lenders with an Auto-Lend criteria that matches it - I suspect this happens more often than most think, but I am guessing.


I have been in a long time, have had many loans in my Auto-Lend filter that I did not get notes allocated, but these came into the marketplace about 15% allocated.

Not my experience so far, but I am new :) I wonder if they use 'banding' when they allocate Auto-Lending, i.e. if a group within a band can't all be allocated a note ($25), then none are, e.g. if 1000 lenders are all vying for a small loan (or portion left of a loan) - so 1000 x $25 = $25,000 and the loan (or portion left) is only $23,000... If they allocate one lender at a time based on Cash/Principle ratio, then this wouldn't apply. Do we know exactly how they determine this?


I did a test recently and added enough cash to bring my ratio up to 18% ($ Bal. v Principal outstanding) but I still missed out on loans that appeared in my Auto-Lend filter.

Sorry, my fault - being new I'm currently running at 50% (at one point 250%), so you've got no chance ;) Point being, that if there is an influx of new users, or significant number of 'small' investors, it could have a large impact... Equally if a large investor is happy with say a 9% return, with a RAR of 13%, they could be sitting on around 30% cash/principle...lots of things can influence what drives Auto-Lending.


The problem as I see it; since Harmoney removed the limit on the number of notes that could be applied for in Auto-Lend from 4 to unlimited, some investors ask for many notes.

I have even read on this forum some guy complaining that he couldn't get 30+ notes he applied for.

How is this different from having 30 investors of a single note in front of you in the queue? Just asking as I don't see why this is necessarily a problem, other than the higher risk for the lender of 30+ notes if it gets charged-off?


so there is not enough to go around!

Sounds like the core of the real problem...

[kiwi_on_OE]

@myles - I haven't gone back to checking my wording, but I think the general intent of my comment that 14% of loans are being filled with auto-lending is right. I was meaning by value (hence my comment about $70k of $500k), not by number. But you're right that we don't know if that 14% is spread evenly across the loans because of individuals preferences.

@permutation - I don't know their allocation process but I would hope that rather than give 30 to one person they shared it around eg. if two people want 30 each, but only 30 available, my preference would be for the two to get 15 each, rather than one gets all and the other none.

Regarding the point about the number/value of loans, it would be interesting to know how that is moving. I assume the outstanding number/value is growing, but the interest paid graph seems to be quite close to a straight line, and the auto-lend volume looks constant, which suggests to me that the total value outstanding might be fairly constant, and new loans are just replacing loans that are being paid off.

[RMJH]

Regarding the point about the number/value of loans, it would be interesting to know how that is moving. I assume the outstanding number/value is growing, but the interest paid graph seems to be quite close to a straight line, and the auto-lend volume looks constant, which suggests to me that the total value outstanding might be fairly constant, and new loans are just replacing loans that are being paid off.

Agree, the cumulative lending totals are growing but total outstanding loan balances seem to be stuck at about $250m. There is clearly a lot of churn.

[myles]

Could be just a matter of timing of the early loans starting to come to an end - the first 3 to 5 years are all growth, after that not so much - the timing is about right from when Harmoney started isn't it? No doubt there would have been a larger than normal influx early, which would now likely be more constant.

There is a finite number of borrowers at any one time...

[darrenc]

Wow - 17 loans are live right now!! This is the first time I've seen this in quite a while, and a good range of them, too. I finally managed to get some notes invested.

[myles]

8787

Just some numbers from a newbie:

Days: 19
Loans: 179
Deposits: $13,200
Invest: $10,900 (Principle: $11,004.08)
Auto-Lend: 53
Payment Protect: 30
Principle Received: $3.57 (early payments)
Gross Interest: $1.00 :)

That's about a 30% Auto-Lend ratio with close to 10 loans a day, 2 or 4 notes on most loans.

[Cool Bear]

8787

Just some numbers from a newbie:

Days: 19
Loans: 179
Deposits: $13,200
Invest: $10,900 (Principle: $11,004.08)
Auto-Lend: 53
Payment Protect: 30
Principle Received: $3.57 (early payments)
Gross Interest: $1.00 :)

That's about a 30% Auto-Lend ratio with close to 10 loans a day, 2 or 4 notes on most loans.

Thanks for sharing.

Your cash to invested ratio is fast dropping and giving the rest of us a chance to get some notes through autolend. :)

Autolend does favour newbies in that your invested amount is still growing. For a big investor with say $200,000 outstanding principal (eg the one with 10,000loans) to maintain even 5% means he/she has to leave at least $10,000 sitting idle as cash.

[myles]

Big spike in the Auto-Lend graph yesterday and a big lump of loans going through - pre-Easter rush maybe?

https://www.harmoney.co.nz/how-it-works/auto-lend#auto-lend-volume-chart

[permutation]

principal:)

[myles]

Your cash to invested ratio is fast dropping and giving the rest of us a chance to get some notes through autolend. :)

Nah, got more to put in yet, gotta build that princip--al...:D

Hoping to get to around 100K, which looks like it will need a bit under 3K reinvested per month, doable if you are not to picky with loans? But sounds like it might take some manual intervention to keep up with...:ohmy:

[Cool Bear]

Nah, got more to put in yet, gotta build that princip--al...:D

Hoping to get to around 100K, which looks like it will need a bit under 3K reinvested per month, doable if you are not to picky with loans? But sounds like it might take some manual intervention to keep up with...:ohmy:

I estimate that if you have 100k, you will have about 7k to 9k each month to reinvest as repayments (including early repayments) is about at that 7 to 9% level from my experience.

[myles]

I estimate that if you have 100k, you will have about 7k to 9k each month to reinvest as repayments (including early repayments) is about at that 7 to 9% level from my experience.

What sort of mix of 36 and 60 mth loans is that based on - seems high - 7 to 9% per month is ~100% per year!? Do those numbers include interest?

[Cool Bear]

What sort of mix of 36 and 60 mth loans is that based on - seems high - 7 to 9% per month is ~100% per year!? Do those numbers include interest?
80% 60mths, 20% 36. Yes including interest. Mostly from early repayments. Bear in mind that it is 7 to 9 % of the balance. I estimate that if I stop investing and start withdrawing whatever cash available, I should be able to withdraw 50 to 67% of my balance within a year.

[myles]

80% 60mths, 20% 36. Yes including interest. Mostly from early repayments. Bear in mind that it is 7 to 9 % of the balance. I estimate that if I stop investing and start withdrawing whatever cash available, I should be able to withdraw 50 to 67% of my balance within a year.

Thanks for that info. With that sort of potential withdrawal rate the overall investment 'risk' is lower than I first thought. A good thing in my view, but others might see it differently.

Out of available funds at the moment :(, moving $'s can be a slow process sometimes... At least I've hit the 17.5% fee now, could be a couple of months to get to 15%...

[darrenc]

Nah, got more to put in yet, gotta build that princip--al...:D

Hoping to get to around 100K, which looks like it will need a bit under 3K reinvested per month, doable if you are not to picky with loans? But sounds like it might take some manual intervention to keep up with...:ohmy:

I've got about that much invested and it's very difficult to maintain it. So much so that I don't let it increase any more; I pull out anything extra and put it into Lending Crowd. You can invest bigger chunks in LC because it's secured, but the rates are lower. Having said that, I'm on 16.5% with Harmoney and 13.9% with LC, so it's not that much different. With LC you have to be in there within a minute of receiving the email to get a B2 (18-19%) and usually within 5-10 mins to get a B1. The A1 and A2 loans hang around longer.

For example, this morning I had $500 in Harmoney. I've invested in 3 loans today (but they are more risky ones where I put in one or two notes as opposed to four). I still have $600 in the account...yes, despite investing, I have more available than at the beginning of the day. On days when I have a lot of meetings, I can accrue $300-500. To keep to my target of 1000 loans minimum, I can't put in any more than 4 notes, and I have reasonably strict criteria.

So, at that level, I've never had an autoloan filled, I just have to monitor it frequently.

[Cool Bear]

I'm on 16.5% with Harmoney and 13.9% with LC
Well done. Those are high figures for significant amounts invested. Mine are just 14.1 and 11.87 (LC). Still happy though.

[BJ1]

Well done. Those are high figures for significant amounts invested. Mine are just 14.1 and 11.87 (LC). Still happy though.
I haven't gone to the trouble of determining if Harmoney's expected default rates are consistent with historical performance but if they are then an investor with high return expectations need only invest in c grade loans to achieve an average gross rate of 19.66% and an after default return of 16.53%. No need to cherry pick better loans if 16.53% before Harmoney's fees is what is wanted. Also, don't touch F grade as the after default after fee returns are less than in E grade. In general the risk of default affecting net portfolio return hardly alters if the number of notes is increased quite significantly, once total portfolio value exceeds a "decent" size - say $40,000. As long as a portfolio has good spread the actual return should approximate the expected return. Once a portfolio exceeds my magical $40,000 there is insignificant additional risk in increasing individual exposures above 4 notes.

I do cherry pick my loans across A-E grades with exposure weighted towards A & B and my average original loan investment is $675 and current weighted gross average interest rate is 17.67%. No losses to date, $83 in arrears (and one A grade loan which had a payment holiday of 6 months and still seems at risk).

[Snow12]

So, at that level, I've never had an autoloan filled, I just have to monitor it frequently.

I have a much bigger level than that and still don't get any Auto Loans. Do get many that meet my Auto Loan rules manually so think the whole Auto loan is a rout.

I'm surprised about no one noticing that the majority of new loans these days are all rewrites. For example just had a look and 8 loans listed and 7 were rewrites. That's seven loans the rest of us won't get much return on and then have to reinvest.

[Soolaimon]

I have a much bigger level than that and still don't get any Auto Loans. Do get many that meet my Auto Loan rules manually so think the whole Auto loan is a rout.

I'm surprised about no one noticing that the majority of new loans these days are all rewrites. For example just had a look and 8 loans listed and 7 were rewrites. That's seven loans the rest of us won't get much return on and then have to reinvest.
Auto Loans???? Havn't scored one since early January. Agree, it's a rout. Rewrites..... it has been like that for months, I don't like the bulk of them but to remain invested one has to take them. And... for the last 3 hours can't access the market place. Unknown error.

[BJ1]

Auto Loans???? Havn't scored one since early January. Agree, it's a rout. Rewrites..... it has been like that for months, I don't like the bulk of them but to remain invested one has to take them. And... for the last 3 hours can't access the market place. Unknown error.

What I've been seeing, although there are always exceptions, is that loans hit the marketplace at about 20% allocated. For many of those I get about 3 minutes to take a position before they jump to over 80% allocated. Given that wholesale investors are taking 75% of total loans on offer this begs the question - is that 75% a manufactured result due to Harmoney's "cutting off" retail investors around about the 25% position? If Harmoney was to allow autolend thresholds to be higher or leave it longer before allocating to wholesale investors would more retail lenders experience satisfaction with their autolend results? Does Harmoney have any responsibility to do this? If this is truly meant to build P2P then the answer is Yes. But Harmoney needs the volume and retail investors are doing well compared to other options available.

[myles]

Given that wholesale investors are taking 75% of total loans on offer this begs the question - is that 75% a manufactured result due to Harmoney's "cutting off" retail investors around about the 25% position?

NO! Retail investors do not Auto-Lend (match) 100% of loans! So Harmoney aren't "cutting off" at 25% or, I suspect, anywhere near it.

I've got a fairly "open" Auto-Lend criteria and it doesn't come close to matching 25% of the loans that go through...

I've had 65 Auto-Lend loans in the last 25 days! In that time I've picked up a total of 248 loans and have left many other loans untouched.

The loans are there, but I suspect retail investors aren't interested in many of them, and the wholesale investors are picking them up very quickly. I'd be interested in knowing what tools the wholesale investors have to pick up the loans that they do, so quickly. I suspect it's a variation of the Auto-Lend facility the retail investors have, but only 'kicks' in once the loans hit the marketplace. Some small portion is no doubt pushed through to ensure fairness (as clearly stated by Harmoney), but I very much doubt its anything like what some have/are suggesting...if you consider the numbers in the bigger picture.

[Investor]

NO! Retail investors do not Auto-Lend (match) 100% of loans! So Harmoney aren't "cutting off" at 25% or, I suspect, anywhere near it.

I've got a fairly "open" Auto-Lend criteria and it doesn't come close to matching 25% of the loans that go through...

I've had 65 Auto-Lend loans in the last 25 days! In that time I've picked up a total of 248 loans and have left many other loans untouched.

The loans are there, but I suspect retail investors aren't interested in many of them, and the wholesale investors are picking them up very quickly. I'd be interested in knowing what tools the wholesale investors have to pick up the loans that they do, so quickly. I suspect it's a variation of the Auto-Lend facility the retail investors have, but only 'kicks' in once the loans hit the marketplace. Some small portion is no doubt pushed through to ensure fairness (as clearly stated by Harmoney), but I very much doubt its anything like what some have/are suggesting...if you consider the numbers in the bigger picture.

Wholesale investors have no 'filter'. Their funds are invested into the platform's loans.

[myles]

Wholesale investors have no 'filter'. Their funds are invested into the platform's loans.

There must be some form of allocation similar to Auto-Lend, even if they don't set a criteria for what they get?

I wonder if there is some form of 'time' based function that holds a loan (after Auto-Lend) in the market place before it's all allocated to Wholesale investors, otherwise they would disappear straight away. That, or it's simply a matter of some portion of whole loans being allocated to Retail and the rest to Wholesale? Possibly based on history of what Retail are buying into and the 'risk'...?

You'd have to monitor all loans showing up in a 24 hour period and compare that to the total number of loans for that 24 hour period, which is provided, to get any sort of picture of how it works, and it's likely to change over time anyway and some loans never get to the marketplace. Too many missing pieces...

[permutation]

There is a lot of supposition going on here at the moment.:bored:

[Investor]

There is a lot of supposition going on here at the moment.:bored:

The information I posted is based on communication directly from Harmoney.

[Snow12]

The information I posted is based on communication directly from Harmoney.

I was told directly from Harmoney that Wholesale investors aren't involved in any retail loans.

[myles]

From Harmoney Disclosure Statement:

Wholesale Investors may participate in funding loans similar to any other
Investor using the Harmoney service, and they may also fund entire loans.

Both retail and wholesale Investors can participate in loans originated on the Harmoney
platform. Wholesale Investors may participate in funding both fractionalised and whole
loans, and retail Investors in fractionalised loans only.

[myles]

From Harmoney Investors Agreement:

A Wholesale Investor:
...


(b) will be allocated Loans to fund by Harmoney from the pool of Loans
available to be funded, and will not be entitled to select any specific Loans
(but can select investment criteria within which Loans are able to be
allocated by Harmoney to that Wholesale Investor); and

[Snow12]

Nothing there says they particitate in the same loans.

From the Harmoney Disclosure Statement

Wholesale Lenders remunerate Harmoney differently to retail Lenders. Wholesale Lenders pay a Service Fee, and may pay an upfront Note Fee, as well as a share of income based on the net return of their portfolio. For this reason, Harmoney may allocate an increased share of loans into the wholesale marketplace.

[Snow12]

This is an interesting statement from the Disclosure Statement re Auto-lend

A Loan is funded 100% by the Auto-lend Option
If a loan listing has been funded 100% by Lenders using auto-lend option, then it will not appear on the marketplace. This is because the auto-lend process runs just before the loans go onto the marketplace. Harmoney dynamically manages the proportion of loans that can be funded by auto-lend based on Lender demand and loan flow.

If this is true, why isn't everyone getting there Auto-lend loans filled. The dynamic manager ain't working.

[myles]

The dynamic manager ain't working.

It is working, just not the way you think. If you read a little more on how it works, it's made clear that Harmoney ensure that there is a fair share of loans that flow into the marketplace so those who don't use Auto-Lend get a similar amount of loans...

I don't believe there is such a thing as "Retail Loans"...

Post your Auto-Lend criteria if you like and I'll try to work out what portion of loans it's likely to match against (probably quite low), and then you have the issue of others with higher Available Funds/Princip--al ratio, and the flow of loans requirement...

Auto-Lend does not 'touch' 100% of loans and most have Auto-Lend criteria that, I suspect, drastically limit the number of matched loans...

Some have suggested that a large number of Auto-Lend matched loans go into the marketplace without being picked up - that's not been my experience at all, even when running at a low AF/P ratio?

[permutation]

Some have suggested that a large number of Auto-Lend matched loans go into the marketplace without being picked up - that's not been my experience at all, even when running at a low AF/P ratio?

I have had many loans appear in my Auto-Lend filter at about 15-20% allocated prior to hitting the marketplace, but not allocated to me. I can then apply for notes manually.

In my experience if my "$ v Outstanding Principal Amount" is less than 15% there is no chance of an allocation, the point being that newer lenders, in your reply #2053, you posted that your "$ v OPA" was 50% and at one stage 250%; so you were high in the priority list. You may find that as your Principal balance increases your allocation may reduce if you don't maintain a large cash balance.

[Saamee]

Now just waiting for Harmoney's RWT Certifcate. Lending Crowd and Squirrel have already generated and issued.

[whitt]

It appears that Harmoney have loosened the auto lend criteria at present.
My experience is autolend was working slowly if I had my balance to outstanding principal ratio in double digit%.
For the past approx three weeks though the autolend has been working all the way into single digit%. My lowest ratio was 7%.

If it keeps working at these new low % then I will be happy. The higher % was a bit unfair. Fingers crossed the new lower levels stay.

[Bjauck]

Have Harmoney stopped regular updates of most of the marketplace statistics? As far as I can see, the latest loan performance by grade and volume stats are from February and platform RAR is from 8th March.

[myles]

You may find that as your Principal balance increases your allocation may reduce if you don't maintain a large cash balance.
As I said in that same post, I've had a low AF/P ratio and still managed to pickup Auto-Lend loans...unless they weight it towards new members, this has NOT been my experience.

[whitt]

Have Harmoney stopped regular updates of most of the marketplace statistics? As far as I can see, the latest loan performance by grade and volume stats are from February and platform RAR is from 8th March.
My funds available balance vs outstanding principal percentage has fallen to a staggering 2.7%.
This is merely using Autolend only.

As my previous post has suggested something happened in last couple of weeks and I am now having a great run at picking up Autolend loans. Fingers crossed they keep the criteria at this level.

Next step is for me to open a second account and try a different set of autolend rules to test and get my RAR up higher. I am on 14.60% RAR at present. Although coming into any recession with many 60 month loans maybe I am better off being happy with my present RAR. From my research the riskier grades get hammered during any economic downturn.

[myles]

My lowest ratio was 7%.

I just pulled some numbers together by copying and pasting Loan ID's from the Lending report with a filter set for Auto-Lend - why don't they include Auto-Lend in the report or send based on the filter :( - and I've got one with a ratio just above 4% - this was on 10/04/2017 which had a large number of loans going through that day.

[myles]

Next step is for me to open a second account and try a different set of autolend rules to test and get my RAR up higher.

Do they let you have more than one account or do you need to open one in another 'name'?

[BJ1]

[QUOTE=whitt;663120]

Next step is for me to open a second account and try a different set of autolend rules to test and get my RAR up higher. /QUOTE]

Bear in mind that RAR is the average return on investment from day one until today. My RAR is 13.76% at 1 April but my current running return before tax is up at 15.70% (for the March month). I've moved month end average gross return (before fees and tax) up 2.25% since November 2015 with not much change in RAR. It takes a lot of increased current return to raise the RAR significantly, because of the long tail from day one.

[Bjauck]

[QUOTE=whitt;663120]

Next step is for me to open a second account and try a different set of autolend rules to test and get my RAR up higher. /QUOTE]

.... My RAR is 13.76% at 1 April but my current running return before tax is up at 15.70% (for the March month)..... I guess the taxable RAR could be higher than the figure on Harmoney's site as (depending on your circumstances) charge-offs may not be tax deductible. DYOR.

[whitt]

Do they let you have more than one account or do you need to open one in another 'name'?
Not sure as I am yet to try

[whitt]

and I've got one with a ratio just above 4% - this was on 10/04/2017 which had a large number of loans going through that day.
4% that very good and confirms my thoughts something has changed recently. Now these stats are more in line with what I had hoped with Autolend, lets hope it continues.

[RMJH]

4% that very good and confirms my thoughts something has changed recently. Now these stats are more in line with what I had hoped with Autolend, lets hope it continues.
5% here but much better and trending down. Will transfer more cash in if this continues. I haven't had to do that in six months.

[myles]

One Month in:

Invested: $21,150
Loans: 313
Auto-Lend: 76
Avg. Interest: 22.13% (Weighted)
Avg. Exp. Return: 14.80% (Weighted less Default+Fees+Tax)

Expected Monthly Return to deal with: $561.46 (Principal + Interest : excludes payoffs)
XIRR: 32.06% (no doubt meaningless at this point in time)

Grade and Term graphs:

8803

I've significantly changed my Auto-Lend criteria range now based on the below Interest less Default graph:

8804

Going to try to significantly increase the D's and E's, but there are not that many to pick from, so this will take some time.

I'm hoping to double up over the next month...

[myles]

Beside the Auto-Lend graph this morning:

Loans go through the Auto-Lend engine before they hit the Marketplaceup to the Auto-Lend allocation limit. This limit is currently set at​ maximum of 20% of the notes in a loan. This leaves 80% for manual orders.

Is that wording new?

[Saamee]

Interested to know if any other Investors failed to get their Harmoney Account Withdrawal actioned yesterday ( THU ) - Mine was an ASB to ASB payment?

Not the 1st time this has occurred at Harmoney and very little explanation as to why!

By the way this failed on TWO different Harmoney accounts..... Both got the confirmation Email

[Soolaimon]

I have just put some more funds into Harmoney, first in more than 12 months, Reason is that it is becoming quite frustrating trying to keep anywhere near fully invested over at LC and even tho I was hit pretty hard with defaults a year ago, my returns are actually better here at Harmoney. I still prefer LC so here's hoping they can attract more custom so one can keep one's funds fully employed.

[Saamee]

I have just put some more funds into Harmoney, first in more than 12 months, Reason is that it is becoming quite frustrating trying to keep anywhere near fully invested over at LC and even tho I was hit pretty hard with defaults a year ago, my returns are actually better here at Harmoney. I still prefer LC so here's hoping they can attract more custom so one can keep one's funds fully employed.

Just up on their Website!!

8806

[Saamee]

I have just put some more funds into Harmoney, first in more than 12 months, Reason is that it is becoming quite frustrating trying to keep anywhere near fully invested over at LC and even tho I was hit pretty hard with defaults a year ago, my returns are actually better here at Harmoney. I still prefer LC so here's hoping they can attract more custom so one can keep one's funds fully employed.

Same here ( apart from putting funds in HM ever again ) - I never took accepting writes offs easily.

[Soolaimon]

Same here ( apart from putting funds in HM ever again ) - I never took accepting writes offs easily.

Strange how things work..... a few minutes after I posted re hard to invest in LC, a loan popped up while I was on line and I scored!!!

[darrenc]

Finally got my first auto-invest with less than 1% available funds

[Pipi]

I had around 4% available funds, have not had an auto lend since 17th December. I topped up, which took me to over 10% available funds, auto lend then kicked in, which was great, but it kept going until I was under 2%. Very surprised.

[alistar_mid]

some of the monthly incomes seem dodgy

a 20-29 year old in Rotorua earning $5.5k / month AFTER tax?

Thats a $87k per year, which is really good for that age group in Rotorua...

8811

[jmacka]

some of the monthly incomes seem dodgy

a 20-29 year old in Rotorua earning $5.5k / month AFTER tax?

Thats a $87k per year, which is really good for that age group in Rotorua...

8811

Yes, something fishy with that one. The comment makes you think the applicant is actually in the South Island but put location as Rotorua.

[Robuste]

LAI*00094753 (https://investor.harmoney.com/) this one worries me repayments 50% of income and paying a mortgage on top of that and grade B2 and a rewrite with principal more than doubling?

[darrenc]

some of the monthly incomes seem dodgy

a 20-29 year old in Rotorua earning $5.5k / month AFTER tax?

Thats a $87k per year, which is really good for that age group in Rotorua...

8811

Could be working remotely in software engineering - they would easily make that money.

[Brut]

Hi, I have just signed up with Harmoney & just about to deposit some spare funds to invest. Just dipping my toes in at this stage but is anyone able to give advice to a newbie?

Cheers

[Wsp]

Hi Brut,
Diversify by only investing 1 note per loan. I would try and have at least 200+ notes across seperate loans. Log in regularly as many loans are repaid/rewritten early and or setup auto investment. This helps minimise the amount of money sitting idle in your account. I personally now avoid the grade A, E and F loans due to my risk/return preferences. and expect to get write offs.

[RMJH]

Hi, I have just signed up with Harmoney & just about to deposit some spare funds to invest. Just dipping my toes in at this stage but is anyone able to give advice to a newbie?

Cheers
Diversify within each grade you choose to invest. Don't be fooled into trying just a few of the riskier grades as it is very much a case of safety in numbers. The higher the risk the more you should diversify so say at least 100 for A's but more like 300 for E's and F's. I have found sticking to A to D gives me a return of 14% which is slightly better than the whole platform so I don't see any benefit of going with E's and F's. I also filter out business loans and any over $35k. Using auto invest is much easier and almost essential to build a portfolio now. Good luck!

[alistar_mid]

Hi, I have just signed up with Harmoney & just about to deposit some spare funds to invest. Just dipping my toes in at this stage but is anyone able to give advice to a newbie?

Cheers

not much to say other than never count your money at the table, until the dealings done.

and yeah you have to log in a lot to pick up new loans

[BJ1]

Hi, I have just signed up with Harmoney & just about to deposit some spare funds to invest. Just dipping my toes in at this stage but is anyone able to give advice to a newbie?

Cheers
Look at the interest-default graph posted by Myles on 20 April. It gives a good pointer for where the optimum net returns are, if defaults in your portfolio align with Harmoney's expectations. Be prepared for defaults to align to expectations and don't be emotional about them - this is a business. Personally, $25 a loan is too small and the only way it makes sense is to just play percentages - in which case you should receive a net return in accordance with Myles' graph - if you want a net return of 16.51% then you can always invest just in C3 loans; or spread equal amounts across B2 to D4

[Brut]

Thanks for taking the time to respond & for the helpful tips, much appreciated!

[alistar_mid]

I've significantly changed my Auto-Lend criteria range now based on the below Interest less Default graph:

8804

Going to try to significantly increase the D's and E's, but there are not that many to pick from, so this will take some time.

I'm hoping to double up over the next month...

Its not as simple as that, the chance to default is per year, and each individual loan has an average length of time before it defaults, where you would receive none or some of the interest payments until that point.

Also when you model what would happen if default rates spiked, the value point shifts from the DEF end to the ABC end.

I have done extensive modelling on this.. I did find that the sweet point is in the E for the current market conditions, should the economy tank and default rates spike, then you would want more ABC's.

I do think most A's suck the interest rate is too low and they are often paid back early. Likewise a lot of the F's - 12% expected annual default rate? no thanks Jeff.

Fwiw this is my distribution, I have 800+ loans, average loan value probably $90 (ie 4 notes most of the time, sometimes 2 or 3)

8818

[myles]

Take some of your points, but I think the graph is a good indicator based on what Harmoney expect/model. (Interest rate is yearly as is default rate, per loan or across all loans). I'd like to know what the average actual loan length is for 36 and 60mth loans.

If there were a sudden increase in job losses then this would effect default rates across all risk grades, potentially high income earners could be effected more (e.g. IT workers in the past).

There is a bit of data out there of what happened with Lending Club in and around 2008, p2p in general fared very well.

My Risk Grades graph is looking more like yours already, and suspect that's about where it will end up. B5 are just to good to pass up and I really need to be across a fair set of ranges to keep up with the turnover.

What are your thoughts on what would happen to p2p lending if the Housing market took a big hit (lots of noise in Australia at the moment that his might be close, maybe not a tank, but a significant slow drop)? Could it happen here, it would hurt an awful lot of NZ'ers?

[myles]

Two links that might be useful to consider for grade selection:

http://www.lendingmemo.com/p2p-lending-recession-performance/

Some of the comments don't actually match the grade block comparison numbers (D's are on top, not A's in 2009). The summary at the end holds a very important point.

http://www.lendingmemo.com/risk-grades-lending-club-prosper/

Risk tolerance isn't the same for everyone...

[Probably mentioned in there somewhere but if it's not: Small investments are typically much more risky/volatile than larger, diverse investments.]

[alistar_mid]

Take some of your points, but I think the graph is a good indicator based on what Harmoney expect/model. (Interest rate is yearly as is default rate, per loan or across all loans). I'd like to know what the average actual loan length is for 36 and 60mth loans.

If there were a sudden increase in job losses then this would effect default rates across all risk grades, potentially high income earners could be effected more (e.g. IT workers in the past).

There is a bit of data out there of what happened with Lending Club in and around 2008, p2p in general fared very well.

My Risk Grades graph is looking more like yours already, and suspect that's about where it will end up. B5 are just to good to pass up and I really need to be across a fair set of ranges to keep up with the turnover.

What are your thoughts on what would happen to p2p lending if the Housing market took a big hit (lots of noise in Australia at the moment that his might be close, maybe not a tank, but a significant slow drop)? Could it happen here, it would hurt an awful lot of NZ'ers?

yeah even though i looked into quite a bit I came to the same conclusion you did - that D/E's are the sweet spot

That lending club article is one that i reference a lot when I explain to people it (harmoney) should be reasonably safe in a recession - it shows whats kinda obvious the higher risk loans are fine when the economy is good and defaults are low, but if conditions where to change and defaults increase then in theory those will go first. Thats why I haven't gone all out on C - F's. I am cutting back on B's, but like you said B5's do represent a lot of value.

Hmm should the housing market crash?

I guess then that would coincide with interest rates going up, so people may not be able to afford their mortgages, and would prioritize a mortgage over a p2p debt, so I guess we would see defaults increase.
For those without ties to the property market who have p2p lending, I guess they would suffer too, housing crash probably = less economic confidence, higher unemployment, some p2p loan holders default

Overall housing market crash = not good, would probably have a negative effect on p2p lending

[permutation]

....
this is my distribution, I have 800+ loans, average loan value probably $90 (ie 4 notes most of the time, sometimes 2 or 3)

8818

Analyzing your graph, in my experience of 1000+ loans, Your B,C,D proportions are great very similar to mine.

But I am getting rid of all A,E,F grades over the next few months and place all the repayments into B,C,D so my spread will look B35, C40, D25. B+C=75% B+D=60% C+D=65%. Expect a RAR of about 17%.

My current default number from 1000+ all time loans is (15) A-D 2/15; E+F 13/15 ouch!!

[myles]

Overall housing market crash = not good, would probably have a negative effect on p2p lending

Yeah, not good :(

One thing I see a lot of people say that they include in their auto-lend (and manual selection I suspect) is 'Owned/Paying Mortgage' - thinking if the borrower can pay a Mortgage they can pay an additional loan. I started out that way, but have now come to the conclusion that a good spread into Rentals is a good choice, exactly because of this reason - if the Housing market drops, my thinking is the 'Owned/Paying Mortgage' group would likely be the higher defaulters, whilst rent would likely drop making the 'Renting' group less likely to default and hence a good diversification choice in this situation?

At the end of the day, I guess the bigger spread you have across most/all types of criteria the more stable your return will be, not necessarily the best return though, if you have the time to ride out any major dips, leaning towards higher risk will give much higher returns.

[myles]

My current default number from 1000+ all time loans is (15) A-D 2/15; E+F 13/15 ouch!!

Is that really an ouch!? If your loans are equal amounts, that default rate only represents 1.5%, E's and F's are worth much more than that in the additional Interest, yes? I guess it depends how many E+F that 13 comes from?

[permutation]

...One thing I see a lot of people say that they include in their auto-lend (and manual selection I suspect) is 'Owned/Paying Mortgage' - thinking if the borrower can pay a Mortgage they can pay an additional loan. I started out that way, but have now come to the conclusion that a good spread into Rentals is a good choice, exactly because of this reason - if the Housing market drops, my thinking is the 'Owned/Paying Mortgage' group would likely be the higher defaulters, whilst rent would likely drop making the 'Renting' group less likely to default and hence a good diversification choice in this situation?....



I think mortgage holders will do all they can not to default. I feel that the repayment to income ratio is important and I generally base my lending on ratios between 5-17% and a max of $25,000.

I do choose renters as well but no "Boarders" or" Living with Parents" or "Other".

[myles]

I generally base my lending on ratios between 5-17%

I'm at <20%


max of $25,000.

I don't bother with this as Harmoney set a max for each Risk Grade which I'm happy with.


no "Boarders" or" Living with Parents" or "Other".

Same, but I pick up the occasional manual loan with these if other criteria look good.

[icyfire]

I do choose renters as well but no "Boarders" or" Living with Parents" or "Other".I've been going back and forth with these three Residental Status options: "Boarding", "Supplied by Employer", "Living with Parents". I personally feel that "Supplied by Employer" is potentially the riskiest option since the borrower could change their job which doesn't supply accommodation and a result their living expenses will go up. "Living with Parents" could be that the borrower is trying to save money for a house deposit, lots of people do it in Auckland. "Boarding" I have no idea what it means exactly. Has anyone done any analysis on the risk of the Residental Status options?

[alistar_mid]

Analyzing your graph, in my experience of 1000+ loans, Your B,C,D proportions are great very similar to mine.

But I am getting rid of all A,E,F grades over the next few months and place all the repayments into B,C,D so my spread will look B35, C40, D25. B+C=75% B+D=60% C+D=65%. Expect a RAR of about 17%.

My current default number from 1000+ all time loans is (15) A-D 2/15; E+F 13/15 ouch!!

interdasting

I am only 7 months in so don't have a long enough time frame to judge, but most of my ones in arrears are E's, I think they are still under repped for how many E's I have * expected default rate

yeah might just go to bcd like you have, although 35% + interest < 5% default rate E's always look good

[permutation]

Is that really an ouch!? If your loans are equal amounts, that default rate only represents 1.5%, E's and F's are worth much more than that in the additional Interest, yes? I guess it depends how many E+F that 13 comes from?


I didn't mention the amounts but here they are; 95% of my loans are A_D grade with only 5% E and F. The maximum numbers of loans held in E,F grades was 10%.
It certainly is OUCH!! I have lost 12% of my Gross Interest through E and F Defaults.

Out of an all time total of 95 E and F grades loans, about half have been Paid-off; 13 Defaults, 6 In Arrears the rest are current and to date I have just about broken even from these grades.

[myles]

It certainly is OUCH!!

Not questioning your numbers, but I'll put a quick example together that you might be able to poke holes in - a lot of assumptions I know:

95 loans at E and F - lets say on average 25% interest annually and $100 on each loan for simplicity.

Total investment 95 x $100 = $9500

13 defaults - lets ignore interest gained prior to the default, which could be significant:

13 x $100 = $1300 principal lost

Assume average payout is only 2 years - could be significantly more or less?

95 - 13 = 82 loans
82 loans at @25% per year for 2 years = (82 * $100) * 25% * 2 yrs = $4100 interest

Less lost principal from above = $4100 - $1300 = $2800 gain over 2 years

$2800 gain over 2 years from initial investment of $9500 = $2800/$9500/2 = 14.7% return (ignoring fees and tax)

Not an ouch? I must be missing something fundamental?

[whitt]

Although if he didn't have the E&F loans his return would have increased to 21%.

I am hovering mid 14% Rar investing in only A,B & C and have changed recently to solely Autolend.

E&F have too high default rates plus the risk of an global economic slowdown has me running a less risky portfolio.

[myles]

Although if he didn't have the E&F loans his return would have increased to 21%.

Where did that come from???

Clearly my example was very 'worst case', since the average interest for E+F is more likely to be around 35% or more (not the 25% I used), there would be a return of probably 1/3rd of the 'lost principal' from interest gained prior to defaulting as well.

Using likely numbers the return would be in the 23-27% range probably more, so a gain on overall rate of return not a loss...

13 defaults from 95 over 2 years is 6.8%, which is pretty much where Harmoney say it will be? (Was this only over 2 years, I suspect it was more?)

I get the Risk aspect of it, but based on the current Harmoney numbers you aren't loosing money being in E or F's instead of lower Risk Grades, you are making money (significant money especially if you re-invest)? BUT there is a RISK, as you say.

What am I missing?

[Darchie]

WOW ... today got my first autolend since 14 December !!!

[alistar_mid]

Where did that come from???

Clearly my example was very 'worst case', since the average interest for E+F is more likely to be around 35% or more (not the 25% I used), there would be a return of probably 1/3rd of the 'lost principal' from interest gained prior to defaulting as well.

Using likely numbers the return would be in the 23-27% range probably more, so a gain on overall rate of return not a loss...

13 defaults from 95 over 2 years is 6.8%, which is pretty much where Harmoney say it will be? (Was this only over 2 years, I suspect it was more?)

I get the Risk aspect of it, but based on the current Harmoney numbers you aren't loosing money being in E or F's instead of lower Risk Grades, you are making money (significant money especially if you re-invest)? BUT there is a RISK, as you say.

What am I missing?

thats pretty much it.

I got a spreadsheet that had expected returns for each of the 6 risk grades, based on all the available stats for each (annual default rates, avg time to default, paid off early rate, avg time to pay off early etc) and modeled returns on each one.

It came out D/E was best return - which we already discussed.

I then ran recession scenarios, ie default rates increase by X % over Y period of time, to find out what would happen to expected returns. I found there is a lot of room to move. On portfolio similar to mine (actually the target I had in mind, it was something like 10% / 20% / 20% / 17.5% / 17.5% / 5%, I would need default rates to increase 5 fold, for my EV = 0.

Granted, thats saying they all just increase by 5 fold. Which when the average default rate of an A is 0.17%, increasing this 5 fold is still not even 1%. So still f all. Realistically in a recessions default rates might be more of an (default rate x 3) + 5% type thing.

Would need some more research on modeling how default rates react to recession scenarios.

Also thought about tracking lead indicators that a recession could be coming, ie unemployment rates etc

[IntheRearWithTheGear]

Does your spreadsheet take into account tax and fees ? Does it take into account early repayments and the effects of having to invest in lots of $25 in order to take avantage of continuous interest earnings ? You would almost need to write a program todo all that ? Paying tax/fees as you earn it - has a huge effect on your earnings at the end.

I think your calculation at the end for returns over years - is not the same as compounding interest.

I think its incorrect to come in at 85 loans at the start and 85 loans at the end - as you would be over time you would be reinvesting in new loans as payback happens etc. The interest you earn would be put into new loans - new loans risk profiles.

Food for thought.

[alistar_mid]

Does your spreadsheet take into account tax and fees ? Does it take into account early repayments and the effects of having to invest in lots of $25 in order to take avantage of continuous interest earnings ? You would almost need to write a program todo all that ? Paying tax/fees as you earn it - has a huge effect on your earnings at the end.

I think your calculation at the end for returns over years - is not the same as compounding interest.

I think its incorrect to come in at 85 loans at the start and 85 loans at the end - as you would be over time you would be reinvesting in new loans as payback happens etc. The interest you earn would be put into new loans - new loans risk profiles.

Food for thought.

The tax and harmoney fees are very easy to do.

The only thing that gets complex is reinvesting. So i don't have that in the model. You can't really add re invested loans to existing loans as payment periods are different etc, has to be a new line in excel and then this in turn has its own stuff reinvested the next period. Kind of like compound interest, except the compound is its own loans with variable characteristic (interest / default rate, % early payback etc etc).

Though I have modeled the scenario that all payments coming out of harmoney go into a managed fund at 8%.

For simplicity i assume investing in chunks of $100

To be more specific I use IRR, ie goal seek on a particular portfolio balance what default rate multiplier (ie simulation of a recession) makes my IRR go to zero.

I pretty sure I have everything exact, i can download a csv from harmoney, feed it into my model, and on my summary page it spits out a (pretty much to the nearest cent) a reconciliation with my harmoney dashboard.

[IntheRearWithTheGear]

Attached calculation. Maybe its wrong though. You may wish to go for your managed fund at 8% as you will get more. Does not take into account you would be reinvesting the returned amounts.

[myles]

What interest rate have you used?

[IntheRearWithTheGear]

25% on 8200 as per www.bankrate.com (http://www.bankrate.com) amortization calculator type tool.


%15 harm fee.
17.5 Tax.

Roughly a new loan can be undertaken every 10 days. So you lose some interest on those days while you wait.

I should have used 20% for harmony fees structure which would bring it down to 5.37% after tax.

So a critcial part of your spreadsheet is the calculations of reinvestment amounts as they come in - without it it wont be very good.

Somewhere in the forum is a modeling tool which tries to do it more correctly.

[myles]

Yeah, nah...

The discussion was about E and F loans so you should have used at least 35%...

You've assumed the defaults are from day one which is not reality - perhaps 1/2 on day one and 1/2 at the start of year 2 - Harmoney state avg default time is 18mths...

What about taking tax of the 8%...got to compare apples with apples...

You've assumed loans end at 2 years, again, not reality. Plug in 35% and even without the other details you'll see that 8% won't come near it...

[IntheRearWithTheGear]

I was just using your numbers and assumptions from your previous post.

Harmony has a graph which you can use to predict defaults - most defaults acording to them happen near the 3 month point and then tail downward

its at the bottom of this page

https://www.harmoney.co.nz/investors/investment-risks

called the hazard curve down the bottom.

Which maps to the below array values - which you can use in your spreadsheet.

2.00, 2.30, 4.00, 5.00, 5.80, 5.70, 5.60, 6.00, 5.70, 5.20, 5.80, 5.00, 4.70, 4.00, 3.60, 3.15, 3.00, 2.70, 2.10, 2.15, 2.00, 1.90, 1.60, 1.40, 1.60, 1.00, 1.20, 1.00, 0.90, 0.80, 0.60, 0.55, 0.50, 0.50, 0.60, 0.15, 0.05, 0.05, 0.05, 0.05, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00



Cheers

[myles]

I was just using your numbers and assumptions from your previous post.

That example was for a completely different and specific purpose and if you read the followup you'll see why...


Harmony has a graph which you can use to predict defaults - most defaults acording to them happen near the 3 month point and then tail downward

You are misreading the graph - you need to consider the area under the graph (only around 10% at 3rd month)?, and that would no doubt be very bias toward the F5 loans which have a default rate of 15.38%.

You are really confusing the discussion - try the given values for say an E3 loan at 35.33% annual interest and an annual default rate of 4.11% per year...and subtract the tax from 8%...then compare (still not a fair comparison as you have principal and interest to re-invest which is significant)...

[alistar_mid]

I was just using your numbers and assumptions from your previous post.

Harmony has a graph which you can use to predict defaults - most defaults acording to them happen near the 3 month point and then tail downward

its at the bottom of this page

https://www.harmoney.co.nz/investors/investment-risks

called the hazard curve down the bottom.

Which maps to the below array values - which you can use in your spreadsheet.

2.00, 2.30, 4.00, 5.00, 5.80, 5.70, 5.60, 6.00, 5.70, 5.20, 5.80, 5.00, 4.70, 4.00, 3.60, 3.15, 3.00, 2.70, 2.10, 2.15, 2.00, 1.90, 1.60, 1.40, 1.60, 1.00, 1.20, 1.00, 0.90, 0.80, 0.60, 0.55, 0.50, 0.50, 0.60, 0.15, 0.05, 0.05, 0.05, 0.05, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00, 0.00



Cheers

I'll do a version 2

The US article that has been linked around here on how p2p lending goes during a recession is reassuring that we should be ok too, reasonably ok.

Ultimately over time, the ultimate measurement is actualls.. a simple XIRR on a timeline of all your deposits vs all your withdrawals..

I'm pretty sure that XIRR is after tax too, as what I have sitting in my account and have had (withdrawals) already has the tax on it.

(i know, I know, I can't get the whole 80k out right now)

8825

[IntheRearWithTheGear]

Yes, i agree the “outstanding principal” has tax paid. And the other good news is you could perhaps add back the harmony fees – as they should be tax deductable.

Good luck claiming any defaults though – other people have ideas on that.

One word of caution is you yet to have defaults as they are roughly 180+ days outstanding and you have only been in the game
for 260 days – so they will take a chink on your 14% - once they start to come through – however you can predict that
with your arrears balance somewhat.

Cheers

[alistar_mid]

Yes, i agree the “outstanding principal” has tax paid. And the other good news is you could perhaps add back the harmony fees – as they should be tax deductable.

Good luck claiming any defaults though – other people have ideas on that.

One word of caution is you yet to have defaults as they are roughly 180+ days outstanding and you have only been in the game
for 260 days – so they will take a chink on your 14% - once they start to come through – however you can predict that
with your arrears balance somewhat.

Cheers


yeah I know I can claim the fees back as an expense, and that my portfolio is not mature so obviously a zero default rate (what it is thusfar) is totally unrealistic.

Seems like I have lucked out a bit, some of the best value loans i found (35% interest, <5% default rate E's) I invested 8 notes in... well 3 of those are in arrears. Really bad strike rate!

[BJ1]

I think mortgage holders will do all they can not to default. I feel that the repayment to income ratio is important and I generally base my lending on ratios between 5-17% and a max of $25,000.
Just a clarification please - is this % the Harmoney payments to income? Because we don't see any other commitments in the borrower details and if they have a mortgage the odds are that will account for perhaps 40% of pretax income? Makin a hellish debt commitment if Harmoney takes 17% of aftertax?

[myles]

Makin a hellish debt commitment if Harmoney takes 17% of aftertax?
Correct, and they will no doubt put paying their mortgage well in front of their Harmoney loan, hence my previous suggestion that 'Renting', is worth diversifying into.

[permutation]

Just a clarification please - is this % the Harmoney payments to income? Because we don't see any other commitments in the borrower details and if they have a mortgage the odds are that will account for perhaps 40% of pretax income? Makin a hellish debt commitment if Harmoney takes 17% of after tax?

That is correct, I have written about this in much earlier posts, some financial commentators state that individuals paying more than 35% of their after tax income on a mortgage loan could be deemed to be in financial stress. So an additional secondary loan could push some people to 40-50% of their income.

One wonders why these individuals don't apply to their bank for an extra loan top-up instead of the secondary market?

I have trawled through my own statistics of 1100 loans taken in the last 2 years. Here are some facts:



642/1100 loans were with a mortgage and only 2 of these have defaulted
348/1100 loans were to renters and a total of 5 defaults
33/1100 loans were owned no mortgage, supplied by employer and 0 defaults
77/1100 loans were living with parents, boarding and other, with a total of 9 defaults

[myles]

Those numbers aren't really meaningful without taking into account the grades that they come from though. e.g. potentially more Renters in higher risk grades?

I suspect you'd only see the real trend if/when the economy/housing marking shifts significantly downward and there would be a lag (maybe 6-12 months after)? (If you study the Lending Club data you can clearly see a lag.)

[icyfire]

I see quite a few borrowers listing Boarding as their Residential Status. What's the difference between Boarding and Renting? Would borrowers who board be a higher risk of defaulting than borrowers who rent?

[BJ1]

642/1100 loans were with a mortgage and only 2 of these have defaulted
348/1100 loans were to renters and a total of 5 defaults
33/1100 loans were owned no mortgage, supplied by employer and 0 defaults
77/1100 loans were living with parents, boarding and other, with a total of 9 defaults
[/LIST]


Stats like these should be a guide to all those lenders who dislike seeing defaults in their book. It is possible to minimise default risk by cherry picking loans but that may come at a cost in terms of net return. The alternative is to just try for the Harmoney average per grade invested in (D & E are highest net) and don't bother thinking about defaults - perform like the Harmoney portfolio in C, D & E and you are doing well. We should all be thankful, as am I, that our money isn't in the banks.

[permutation]

I see quite a few borrowers listing Boarding as their Residential Status. What's the difference between Boarding and Renting? Would borrowers who board be a higher risk of defaulting than borrowers who rent?

Generally Boarders are people that rent a room from either a Home owner or a Boarding House for a fixed amount per week which could include a bed and other furniture and sometimes a meal may be provided.

Renting is mostly an unfurnished house that one or more people pay a Landlord and the renters themselves provide all the necessities of everyday living.

Many young people over 18 may board with their parents or other relatives for a time, because renting could be a prohibitive cost to them starting out into adult life.

It's hard to judge the risk between renters and boarders in the lower E and F grades, but only 2 from 16 of my loan defaults to date were mortgage holders in the B grade.

[myles]

Not sure if these have come up here before - a very interesting set of graphs from Lending Club:

https://www.lendingclub.com/info/demand-and-credit-profile.action

Clearly you can't compare directly as there are many differences.

The 'Historical Returns by Grade' and 'Net Annualized Return by Vintage' are particularly interesting.

[Fisherking]

I haven't read this thread for a while, just skimmed the last 2 pages and can't see any mention: I've noticed over the last week or two my auto-lend is now working right down to $0.00. I'm assuming this change has been applied to all?
Certainly beats logging in each day and selecting loans. Thumbs up from me.

[whitt]

Autolend for the week has been going flat out. My account has picked up heaps of loans automatically and is now nearly at zero $.

[alistar_mid]

Autolend for the week has been going flat out. My account has picked up heaps of loans automatically and is now nearly at zero $.


yeah theres tonnes of loans now.

By the end of this week i would have deployed about $40k in the space of 3 weeks.

[RMJH]

yeah theres tonnes of loans now.

By the end of this week i would have deployed about $40k in the space of 3 weeks.
Wish I could say the same. I put an extra $10k in last week with the hope I might get more loans but there has been only a modest improvement in the cash % (excluding the new funds).

[alistar_mid]

Wish I could say the same. I put an extra $10k in last week with the hope I might get more loans but there has been only a modest improvement in the cash % (excluding the new funds).

sorry while alot of mine was through auto lend, most was from logging on and allocating manually. Like putting in 4+ per loan if the loans good (ie C - E2 sweet spot). Also putting more notes in 36 month loans as i want the money recycled faster.

[Bjauck]

sorry while alot of mine was through auto lend, most was from logging on and allocating manually. Like putting in 4+ per loan if the loans good (ie C - E2 sweet spot). Also putting more notes in 36 month loans as i want the money recycled faster. I guess, the sweet spot could differ by a few grade points if you are or are not able to deduct charge-offs for tax purposes.

[alistar_mid]

I guess, the sweet spot could differ by a few grade points if you are or are not able to deduct charge-offs for tax purposes.

well the plan is to get this 100k in then sit back and have a 36 month auto lend going, anything that doesnt get allocated at the end of the week will go through to my bank via a auto deposit.

pretty sure that loan dist graph is by count not value, i think by value it would be more skewed C,D,E

8843

[Cool Bear]

well the plan is to get this 100k in then sit back and have a 36 month auto lend going, anything that doesnt get allocated at the end of the week will go through to my bank via a auto deposit.

pretty sure that loan dist graph is by count not value, i think by value it would be more skewed C,D,E

8843
It is by value, not number of loans. You can "export" your loans details and add it up. However, Harmoneys dashboard is not always equal to the actual details due to what they deem timing issue.

[permutation]

sorry while alot of mine was through auto lend, most was from logging on and allocating manually. Like putting in 4+ per loan if the loans good (ie C - E2 sweet spot). Also putting more notes in 36 month loans as i want the money recycled faster.

Judging from your interest v Outstanding Principal you haven't been in very long?.
You have no Charge-offs yet!
Good luck with the E Grades.

[Wsp]

Also putting more notes in 36 month loans as i want the money recycled faster.

I see you haven't been investing for long. From my experience 60 month loans are often repaid/rewritten early. So you don't really need to focus on 36 month loans to achieve your aim. Well over 50% of the loans I invested in in December 2014 have been repaid/rewritten.

[alistar_mid]

I see you haven't been investing for long. From my experience 60 month loans are often repaid/rewritten early. So you don't really need to focus on 36 month loans to achieve your aim. Well over 50% of the loans I invested in in December 2014 have been repaid/rewritten.

I did quite a lot of research, I inquired with Harmoney and they informed me about 3% of your loan portfolio gets repaid / re written each month. So as I have modelled it, if you are doing auto withdrawal+ ~3% early repayments per month you get about 50% of your capital back in the first year.

I didn't realise (although I can probably confirm) that there was more of a skew with early repayments from the 60 month loans.

Will have to crunch the numbers on that one.

[alistar_mid]

Judging from your interest v Outstanding Principal you haven't been in very long?.
You have no Charge-offs yet!
Good luck with the E Grades.

nah since august last year.

I keep track of forecast defaults vs actual, but none yet.

[icyfire]

Can this borrower's monthly income be for real? If so, why would someone earning over $18k a month need to borrow $25k?
8844

[SilverBack]

Some people earn big and spend big. Remember how Kim Dotcom used to live in the Coatesville mansion?
Best to be guided by the credit ranking. D4 is a high risk and big earners can over spend big too.

[Darchie]

In my view there seems to be too many eyebrow raising after tax figures ... move the decimal points would be more like it...

[Wsp]

Can this borrower's monthly income be for real? If so, why would someone earning over $18k a month need to borrow $25k?
8844

I use a lower threshold on the repayment to income ratio in my auto lend filter to avoid loans like this with questionable incomes.

[RMJH]

Can this borrower's monthly income be for real? If so, why would someone earning over $18k a month need to borrow $25k?
8844
And it's a re-write! Extra funds only $4k. Probably a typo.

[myles]

If you have a repay/income rate set below 4.37% you won't get many auto-lend loans?

My guess is that there is another large loan/investment involved elsewhere.

With a repayment history and if you believe the income, this could be a good investment for 28.7% interest. Will probably be paid back early but who knows...

Purpose of 'Debt Consolidation', which is what the original loan was probably for, has now changed to include 'upgrade accommodation', the borrower has only bumped the loan from 21,487 to 25,500, so I'm guessing just cash strapped at the moment?

[alistar_mid]

Can this borrower's monthly income be for real? If so, why would someone earning over $18k a month need to borrow $25k?
8844


yeah lol when you do your download, sort by borrower income, I have one guy earning $22k per month needing to take a $25k loan and he's deemed as pretty risky so he's a D

Would love to have the problem of spending $22k a month.

[Wsp]

If you have a repay/income rate set below 4.37% you won't get many auto-lend loans?

I should have been clearer. What I meant was having a repayment to income range in my auto lend with a lower limit of say 5% and an upper limit of 25%.

[myles]

I should have been clearer. What I meant was having a repayment to income range in my auto lend with a lower limit of say 5% and an upper limit of 25%.

That makes sense now. I've got quite a few really good loans that fall below that though, especially in the higher B risk grade, so not something I'd do.

[Fisherking]

Can this borrower's monthly income be for real? If so, why would someone earning over $18k a month need to borrow $25k?
8844

Not that long ago i was invested fairly heavily in property. Mostly sold now and converted to shares/ P2P/ funds, however when i was invested i sometimes had to fill in forms that stated my income; several times i was embarrassed because the monthly income figure was ridiculously high but was in fact correct. The other side of the paper of course contained outgoings which evened things up somewhat. This guy could be in the same boat and could easily be in a position of wanting a few extra $ on short term basis - something like Harmony would be cheaper than refinancing with the bank and wouldn't have the same regulatory scrutiny.

[PennyPicker]

Thanks Fisherking, good explanation. It's easy to forget we see only one side of the balance sheet, as you say.

I wonder though, on a loan application is it gross income or net the lender really wants to see? (Hmm... answered my own question http://finance.zacks.com/mortgage-lenders-use-net-gross-income-5903.html).

[bung5]

Thanks Fisherking, good explanation. It's easy to forget we see only one side of the balance sheet, as you say.

I wonder though, on a loan application is it gross income or net the lender really wants to see? (Hmm... answered my own question http://finance.zacks.com/mortgage-lenders-use-net-gross-income-5903.html).


hmm was wondering the same however the loan details state:

MONTHLY INCOME (after tax)
BORROWER INCOME: XXXX


Which isn't gross...

[whitt]

Auto withdrawal suggestion:

Today I emailed Harmoney the following suggestion to add for Auto withdrawal existing feature.

Suggestion 1:
Minimum account funds available level
Proposed- The $25 level is adjustable in $5 increments and works as a minimum level you want left in account.

Suggestion 2:
Customer can choose between A or B

A- As per existing where funds are withdrawn completely ( although now only down to minimum level set above)
or
B- An option to remove a fixed amount each week which would leave rest available to invest if required

These suggestions enhance existing Harmoney feature but allow quite a bit of flexibility for investors. example: Some one who wants to retire and say have $300 per week to live off can do so whilst remaining money stays in funds available being reinvested by auto lend.

[bung5]

Great suggestion. I also suggested to have multiple filters work on the Autolend .

E.g

Filter 1 - 36 month loans , b- d grade
Filter 2 - 60 month loans a grade
filter 3 - 36 & 60 months, e & f grade, debt to income ratio 0 - 15%

All of them running looking for loans to invest in

[Pipi]

I can't understand why it takes so long to get monthly statements out.

[alistar_mid]

Auto withdrawal suggestion:

Today I emailed Harmoney the following suggestion to add for Auto withdrawal existing feature.

Suggestion 1:
Minimum account funds available level
Proposed- The $25 level is adjustable in $5 increments and works as a minimum level you want left in account.

Suggestion 2:
Customer can choose between A or B

A- As per existing where funds are withdrawn completely ( although now only down to minimum level set above)
or
B- An option to remove a fixed amount each week which would leave rest available to invest if required

These suggestions enhance existing Harmoney feature but allow quite a bit of flexibility for investors. example: Some one who wants to retire and say have $300 per week to live off can do so whilst remaining money stays in funds available being reinvested by auto lend.


that is a great idea, I have both auto lend and auto withdrawal going, the idea being each week I get money reinvested and whatevers left over gets paid out to my bank account on a Monday. obviously this amount is variable depending on how many auto loans get filled. Would rather have a set minimum to get paid out to my bank acc.

[777]

I can't understand why it takes so long to get monthly statements out.

They are slow in getting out the March tax statements as well.

[Saamee]

They are slow in getting out the March tax statements as well.

Coming out on Friday ( tomorrow! )

[777]

Coming out on Friday ( tomorrow! )

Thanks. It's delay is holding up a big refund due.

[permutation]

Coming out on Friday ( tomorrow! )

Let's hope so! The IRD deadline for institutions to issue an IR15 tax certificate is 20 May.

[alistar_mid]

Thanks. It's delay is holding up a big refund due.

this

was expecting to wake up to an email from Harmoney saying I could get my tax certificate..

midday now... where is it Harmoney????

[777]

this

was expecting to wake up to an email from Harmoney saying I could get my tax certificate..

midday now... where is it Harmoney????

They are there now.

[Saamee]

They are there now.

Sure are ;)

[RMJH]

Sure are ;)
But what the heck do all those Payment Protect numbers mean!

[Fisherking]

Auto withdrawal suggestion:

Today I emailed Harmoney the following suggestion to add for Auto withdrawal existing feature.

Suggestion 1:
Minimum account funds available level
Proposed- The $25 level is adjustable in $5 increments and works as a minimum level you want left in account.

Suggestion 2:
Customer can choose between A or B

A- As per existing where funds are withdrawn completely ( although now only down to minimum level set above)
or
B- An option to remove a fixed amount each week which would leave rest available to invest if required

These suggestions enhance existing Harmoney feature but allow quite a bit of flexibility for investors. example: Some one who wants to retire and say have $300 per week to live off can do so whilst remaining money stays in funds available being reinvested by auto lend.

Simpler if they just paid interest on $ not yet applied, direct to your account. Shouldn't be that hard

[scottwalshnz]

But what the heck do all those Payment Protect numbers mean!

The link at the bottom has a good summary the tax implications. However I feel it has a gap on the treatment of the Management Fee Rebated and Protect Borrower Fee Rebated, and I'm attempting to work out how to apply a BPA based on the data provided....

[whitt]

But what the heck do all those Payment Protect numbers mean!
https://www.harmoney.co.nz/investors/tax-returns?_ga=2.154764924.5549724.1495182251-2062486148.1475453833

[kiwi_on_OE]

Now that the tax certificates are out I can do my tax return. It's my first year for putting P2P in my tax return.
1) I assume you all claim the lending fees as expenses in your tax returns?
2) Which box do you put them in?
For me the non-resident online help says I can't claim expenses against non-resident passive income, i.e. interest.

After further investigation, looks like residents and non-residents are treated slightly differently. Residents could claim it in box 26 "Other expenses and deductions". Non-residents have a similar box, but as before can't claim expenses against passive income. P2P lending. Not fair.

[Saamee]

Now that the tax certificates are out I can do my tax return. It's my first year for putting P2P in my tax return.
1) I assume you all claim the lending fees as expenses in your tax returns?
2) Which box do you put them in?
For me the non-resident online help says I can't claim expenses against non-resident passive income, i.e. interest.

After further investigation, looks like residents and non-residents are treated slightly differently. Residents could claim it in box 26 "Other expenses and deductions". Non-residents have a similar box, but as before can't claim expenses against passive income. P2P lending. Not fair.

Then come back to NZ!

[Finite]

My Tax Statement shows an incorrect address for me - anybody else have this problem?

[Saamee]

My Tax Statement shows an incorrect address for me - anybody else have this problem?

No all good here x 2. Did you get the Data you expected?

[RMJH]

Now that the tax certificates are out I can do my tax return. It's my first year for putting P2P in my tax return.
1) I assume you all claim the lending fees as expenses in your tax returns?
2) Which box do you put them in?
For me the non-resident online help says I can't claim expenses against non-resident passive income, i.e. interest.

After further investigation, looks like residents and non-residents are treated slightly differently. Residents could claim it in box 26 "Other expenses and deductions". Non-residents have a similar box, but as before can't claim expenses against passive income. P2P lending. Not fair.
Obviously I know nothing of your personal tax situation but it might not matter because whatever tax you pay in NZ gets offset against UK tax. In UK you can claim P2P expenses and writedowns right?

[myles]

Two Months in: Have managed to double up and then some, switching to 4 notes per loan for most loans.

Invested: $54,229.89
Loans: 635
Avg. Loan Size: $85.31
Auto-Lends: 190
Avg. Interest: 22.79% (Weighted)
Avg. Exp. Return: 15.73% (Weighted less Default+Fees+Tax)

Expected Monthly Return to deal with: $1,471.20 (Principal + Interest : excludes payoffs)
XIRR.: 19.23% (starting to stabilise now)
Interest Paid to date: $302.96

After doing some calculations of my own I've settled on a Risk Grade spread from B3 to E3, which I feel will give me a good return with enough loans to keep up with the total investment I'm aiming for - I'll most likely narrow this spread as time goes on and I get a better feel for Grade defaults and timing, and other variations over time.

Loan Term Graph:

8854

Risk Grade Graph:

8855

Risk Grade Detailed Graph:

8856

[permutation]

Two Months in: Have managed to double up and then some, switching to 4 notes per loan for most loans.


......After doing some calculations of my own I've settled on a Risk Grade spread from B3 to E3, which I feel will give me a good return with enough loans to keep up with the total...


......Risk Grade Detailed Graph:

8856


Like I have mentioned before myles, after 2 years, I was shocked by the number of E an F grade defaults 13/16 to be exact. As I have not been taking any new E and F grade loans for a number of months, I now have one quarter left of the originals through default or repayment that will all come due between now and November 2018. My statistics show a NIL or Negative return once all these loans terminate.

I'm thinkin why turnover this money when the end result will be Zilch!

I strongly agree with B2 to D4: should I be charging fees for my opinions through experience!!

[myles]

I don't mean to be rude, but I wouldn't pay for your advice. From what you've said, I've either missed something completely or you don't get the whole risk vs default thing.

You've indicated before that you have had 95 E and F loans, 13 of which have defaulted (in 2 years?) - this sounds completely normal to me - this is very close to what Harmoney suggest will happen. You are getting 30-40% interest on these loans, defaults are to be expected.

Calculate how much interest you've gained from the other 80 loans that didn't default - if they were paid out early, you need to consider reinvestment, otherwise you are not looking at the whole picture - that money was freed up to earn further interest (and some defaults no doubt)?

As a very simple example to get 'Zilch':

If you had 100 of these E+F loans ($1 each = $100 invested) at say 35% interest and if you were to assume 50% of interest lost as tax+fees, this works out at 85 paid out in one year ($85 principal returned + $30 interest - $15 tax+fees = $100) and 15 defaults from day one ($0) to get 'Zilch' - anything above that is profit? You should be able to claim some tax back from this as well, which means it's still not 'Zilch'.

Clearly you would expect to get some significant return in the following years from at least some of these loans that continue past year 1 and the money that would be reinvested from those paid back early.

Note that the 15% default rate used in the example is the maximum expected for an F5 loan!

Or do I have my numbers wrong?

[whitt]

If you want to pay for my advice instead LOLLoan defaults start to kick in from month 9 or 10. Which is inline with Harmoneys stats.There is another graph somewhere a user here posted that takes into account Harmoney stats. It showed actual returns for each grade vs actual defaults.Using that data it showed returns were low if you invested in E and F. In fact returns were higher using D grades.

[permutation]

[QUOTE=myles;666932]I don't mean to be rude, but I wouldn't pay for your advice.....
QUOTE]
Let's be clear, I said: "...should I be charging fees for my opinions through experience!!", I don't give advice.

[bung5]

Two Months in: Have managed to double up and then some, switching to 4 notes per loan for most loans.

Invested: $54,229.89
Loans: 635
Avg. Loan Size: $85.31
Auto-Lends: 190
Avg. Interest: 22.79% (Weighted)
Avg. Exp. Return: 15.73% (Weighted less Default+Fees+Tax)

Expected Monthly Return to deal with: $1,471.20 (Principal + Interest : excludes payoffs)
XIRR.: 19.23% (starting to stabilise now)
Interest Paid to date: $302.96

After doing some calculations of my own I've settled on a Risk Grade spread from B3 to E3, which I feel will give me a good return with enough loans to keep up with the total investment I'm aiming for - I'll most likely narrow this spread as time goes on and I get a better feel for Grade defaults and timing, and other variations over time.

Loan Term Graph:

8854

Risk Grade Graph:

8855

Risk Grade Detailed Graph:

8856


Thats a good effort getting 50k in a few months. I would like to get 50k in however finding hard to get the criteria I want.... mainly because I only want 36 month loans which seem to be few and far between. Currently investing between $100-$200 a day using auto-lend.

Wouldn't mind getting some 60 month loans if I knew there was a secondary market I could sell on. I might just have to concede and start getting the 60 month loans as to get capital invested quicker.

[Saamee]

Thats a good effort getting 50k in a few months. I would like to get 50k in however finding hard to get the criteria I want.... mainly because I only want 36 month loans which seem to be few and far between. Currently investing between $100-$200 a day using auto-lend.

Wouldn't mind getting some 60 month loans if I knew there was a secondary market I could sell on. I might just have to concede and start getting the 60 month loans as to get capital invested quicker.

You can count on approx 50% early repayment of all loans at HM.

[myles]

If you want to pay for my advice instead LOLLoan defaults start to kick in from month 9 or 10. Which is inline with Harmoneys stats.There is another graph somewhere a user here posted that takes into account Harmoney stats. It showed actual returns for each grade vs actual defaults.Using that data it showed returns were low if you invested in E and F. In fact returns were higher using D grades.

Nope, not paying for anyone's advice, especially advice provided on a forum...

A quick look back shows two previous discussions that touch on this.



For the record my write offs are

A 0 out of 266
B 0 out of 329
C 0 out of 245
D 2 out of 126
E 8 out of 87
F 2 out of 26

My annualised returns over a two year period are A 9.7%, B 12.2%, C 16.0% D 17.0%, E 13.7%, F 20.5%, Overall 12.2% This is quite a lot better than LC and I am not in Squirrel

and this







average return PY
average loss PY
average total return PY


A
11.87%
0.17%
11.70%


B
15.15%
0.53%
14.62%


C
20.86%
1.20%
19.66%


D
27.25%
2.00%
25.25%


E
35.20%
4.28%
30.92%


F
39.63%
10.62%
29.01%




Read into them what you want, but they don't support a return of zero or less on either E or F grades.



Let's be clear, I said: "...should I be charging fees for my opinions through experience!!", I don't give advice.
Okay...I wouldn't pay for your opinions through experience either.

My guess, based on who knows what, is that the return graph would look something like the following, where the F5 loans would be approaching the same return of A1 loans. Just where the peak is, is simply too hard to determine and would be very dependant on the criteria used to select loans... By using a different selection criteria immediately means that one persons results will be completely different to anothers, even if they are selecting from the same Risk Grades...

8858
Please don't use this graph as anything more than a discussion point - it doesn't reflect reality...

[myles]

The other thing I meant to mention about that return graph, is that it would be constantly changing based on what is happening in the economy, especially over time, and any changes that Harmoney will no doubt be making on their loan grading...

[whitt]

Myles as you have mentioned return graphs are subject to economic conditions.

Harmoney actual stats dont currently reflect returns during a economic downturn as Harmoney hasn't been around long enough.
There was also a link to an overseas write up which outlined real results from p2p who existed at time of Gfc. These riskier grades had a spike in defaults and for those years the safer grades returned better.

Ideally if an economy slowed people might be better to invest in safer grades for those years. Then as economy improves again ramp back to riskier grades.

[myles]

Ideally if an economy slowed people might be better to invest in safer grades for those years. Then as economy improves again ramp back to riskier grades.

Agree. With the current President of the US doing 'unpredictable' things, possible government change coming in NZ, and the noise coming out of Aus. at the moment, I personally have taken a fairly measured approach.

However, when things settle a little, if they do, I'll be reinvesting early payoffs in a more aggressive risk profile for a better return. I've been focused on getting money in quickly to surpass the $50K amount to reduce the fee rate down to 15%. I'm still focused on getting money in reasonably quickly as the return is significantly better than I'm currently able to achieve, but I have foreign exchange rates depicting the timing of me moving money. Everyone's different.

There seems to be a few here who think they have the golden answer to how to invest in Harmoney, but I really don't think they are seeing the big picture. I just outline what I'm doing based on what I think is best for me - it may not be best for anyone else, there will be some who think it's wrong, that's fine by me :)

[myles]

One thing I'd add to the above is that trying to predict the ups and downs of any market is ALWAYS fraught with risk. Better to look at the long term and 'ride' through the ups and downs. Investing 101 type stuff applies here too I think :mellow:

[Investor]

Like I have mentioned before myles, after 2 years, I was shocked by the number of E an F grade defaults 13/16 to be exact. As I have not been taking any new E and F grade loans for a number of months, I now have one quarter left of the originals through default or repayment that will all come due between now and November 2018. My statistics show a NIL or Negative return once all these loans terminate.

I'm thinkin why turnover this money when the end result will be Zilch!

I strongly agree with B2 to D4: should I be charging fees for my opinions through experience!!

It's quite apparent that lending money at 31.81% (E1 Grade) or higher is usury and isn't ethical or intelligent.

[Bjauck]

It's quite apparent that lending money at 31.81% (E1 Grade) or higher is usury and isn't ethical or intelligent. At what stage does lending money for interest become usury for you? For you, does it make a difference for what purpose the borrower wants or needs the money?

[Bjauck]

Most market place stats have been "temporarily unavailable" for some time now...Does anybody know if they intend to make them available again?

[alistar_mid]

One thing I'd add to the above is that trying to predict the ups and downs of any market is ALWAYS fraught with risk. Better to look at the long term and 'ride' through the ups and downs. Investing 101 type stuff applies here too I think :mellow:

I agree with pretty much everything you have posted - we've come to the same conclusion the sweet spot is E grade loans (you further clarified its grade E5 I believe?), so you would in theory build your portfolio around this to maximise returns.

One things however that has always nagged me is all the stats harmoney has to determine these default rates - are they from the current and near past economic climate where everything has been good? because if so then the data set all these stats which we model off, is only reflective off good times.

So keeping this in mind, i have swayed back and forth between having a B-C weighted portfolio, or a more B-C-D-E one like I actually have.

One thing though you are locked in for 3 or 5 years, but you get about 3% of your capital back every month via natural repayments and loans paid off early, so you do have time to re position your portfolio as you might see the current economic climate changing and potential defaults going up.

That being said I am happy to be weighted B / C / D / E, for now I have $100k in there, but not gonna re invest any til I am down to $50k, just gonna have it coming out to kinda just test how it goes, only have been in 8 months and don't want to get too carried away too early with it

[myles]

One thing though you are locked in for 3 or 5 years, but you get about 3% of your capital back every month via natural repayments and loans paid off early, so you do have time to re position your portfolio as you might see the current economic climate changing and potential defaults going up.

Agree, and from what I've seen of published P2P lending numbers from Overseas, there is a fair lag in changes to the economy and the effects flowing into P2P lending (6 months'ish best guess), giving you a reasonable amount of time to make adjustments.

[myles]

One things however that has always nagged me is all the stats harmoney has to determine these default rates - are they from the current and near past economic climate where everything has been good? because if so then the data set all these stats which we model off, is only reflective off good times.

Harmoney label it as a 'Forecast Default Rate' as an annual rate...

That could mean a lot of different things, but sounds like it is what they expect the default rates to be for the current forecasted year? When/do they update these?

Probably based off the previous year?

Finger in the wind I reckon...

[RMJH]

I agree with pretty much everything you have posted - we've come to the same conclusion the sweet spot is E grade loans (you further clarified its grade E5 I believe?), so you would in theory build your portfolio around this to maximise returns.

Maximum expected return does not necessarily mean best return unless volatility (risk) is the same.

[Entrep]

Anyone have some advice for some suitable auto lend filters for a newbie/average investor? The number of filters and options within them is pretty overwhelming, as is the size of this thread! (148 pages).

[whitt]

Anyone have some advice for some suitable auto lend filters for a newbie/average investor? The number of filters and options within them is pretty overwhelming, as is the size of this thread! (148 pages).
Just take a punt at what you would feel comfortable lending to if doing it manually.
Your personal circumstances dictate how you invest so no one rule fits all. You might as an example have only a small amount you want to invest with p2p in which case spreading minimum $25 across numerous loans could work as compared to $1000 on each.

If you read each filter option you can think of various outcomes for each.

Also remember your % funds available balance is important ( read Harmoney website) to determine your ranking on if you successfully get allocated an auto loan. Some weeks the filter picks up lots other very few.

[myles]

Anyone have some advice for some suitable auto lend filters for a newbie/average investor? The number of filters and options within them is pretty overwhelming, as is the size of this thread! (148 pages).

Just my thoughts, others will differ:

Payment Protect: In theory should help protect both Borrower and Lender, may cause some Tax issues for Lenders. I don't have an issue with it so include it.

Repayment To Income Ratio: A key indicator of what a Borrower can afford. Less than say 20% I think is a fair setting, but if the income is very high, this could be increased significantly. Also consider what other loans the borrower may have e.g. Mortgage.

Residential Status: All obvious and something you need to decide. My preference is: Fully Owned, Paying Mortgage and Renting.

Purpose: Very much a personal choice. Though I've change these a little from what I first thought after seeing some historic numbers from another P2P Lender (Overseas). Apparently Holiday Expenses are much more likely to be repaid than Education Expenses, which goes against what I would have expected. My current Auto-Lend list (not the same as what I use for manual loans) is:
Business Cash Flow, Clear Overdraft, Dept Consolidation, Holiday Expenses, Home Improvements, Household Items, Medical Expenses, Purchase Boat, Purchase Caravan, Purchase New Vehicle, Purchase Used Vehicle, Wedding Expenses

Years At Residence: I look for at least some stability and set this at 2 or More, but quiet happily go against this when selecting manual loans.

Estimated Default Rate: This is were you dial in the risk you are willing to take. It also allows you to pick the Risk Grade you want to be in. Mine are currently set at 0.1% - 4.25%.

Interest Rate: Really just use this to fine tune your Risk Grades. Mine are currently set at 15.15% - 35.7%, which matches B3 - E3 Risk Grades. With manual loans I may look outside of this range.

Grade: Too course really, but easy if you just want specific risk grades. For me no real need to set these, only as a fallback if the Risk Grade percentages are changed - B, C, D, E.

Age Band: Personal preference. For Auto-Lend I prefer not too young and not too close to the grave, so 20-29, 30-39, 40-49, 50-59. But again, I'm happy to go out of these ranges on manual loans depending on other criteria.

Years At Employer: To me a sign of stability. Mine is currently set at 2 Or More.

Loan Amount: Each risk grade has a predefined maximum loan amount set by Harmoney, which I'm mostly happy with, however I restrict those loans over $50,500 (i.e. 70K), from my Auto-Lend, just because they sound like a lot (A Grade only anyway)?

Max Term: I don't have this set, as I'm happy to take 36 or 60 mth term loans. There seems to be quite a few who limit this to 36 mth loans, but this reduces the number of loans that can be picked up to around 20% (i.e. 80% of loans are 60 mth loans). On paper, you should actually get a slightly better return on a larger loan, but this is debatable I guess. Note that Harmoney have suggested that around 3% of loans are paid out early per month, so quite a few loans don't go to full term - something to consider when making this choice.

Other options, that I don't bother with, but should be obvious:
* You've already invested in
* Time remaining
* Amount funded
* Application Type

Two other points that I've found from reading about other P2P lenders is that a borrower who has had a previous loan with some payments and/or a joint loan, is a very good indicator that the borrower will not default (no guarantee obviously).

Some take into account the borrowers description, to the point of whether they can spell or not, to me this is a bit of a furphy as I know quite a few people who are quite capable of paying of a loan, who can't spell for *&%#!

[Entrep]

Thanks both and especially Myles, that is very helpful! One last thing - if I wanted to get say $20K invested into the platform fairly quickly (say over the course of a month or two), and used similar auto-lending like you have above - is that realistic without being completely reckless? How many notes would you go for each loan? OR, do most people set up some sort of direct debit system so that they don't have too much sitting idle in Harmoney's system?

I have to say that Harmoney's system seems a lot more complex. Squirrel there is zero loan flow so I have stopped even checking that. LendingCrowd I am having great success getting funds invested (about $5K per week at about $500 per loan).

[RMJH]

Thanks both and especially Myles, that is very helpful! One last thing - if I wanted to get say $20K invested into the platform fairly quickly (say over the course of a month or two), and used similar auto-lending like you have above - is that realistic without being completely reckless? How many notes would you go for each loan? OR, do most people set up some sort of direct debit system so that they don't have too much sitting idle in Harmoney's system?

I have to say that Harmoney's system seems a lot more complex. Squirrel there is zero loan flow so I have stopped even checking that. LendingCrowd I am having great success getting funds invested (about $5K per week at about $500 per loan).
Depends on the grade. If only A's then 100 probably enough (as a minimum) but for F's you might want 300. IMO best to treat each grade seperately and diversify within each grade.

[myles]

if I wanted to get say $20K invested into the platform fairly quickly (say over the course of a month or two), and used similar auto-lending like you have above - is that realistic without being completely reckless?

Yes, with the way Auto-Lend is working at the moment. I've picked up 190 Auto-Lend loans in the last 2 months. Though I've made a few Auto-Lend adjustments along the way. If you have the time, I'd suggest you check in for manual loans at the following times:
9am and 10am
Midday - 1pm
4pm - 5pm
8pm - 10pm

These times are unpredictable, but my 'feeling' is that these are when I'm seeing most loans appear in 'lumps'.


How many notes would you go for each loan?

I'm happy with 4 notes per loan now ($100), very occasionally I'll pick up a loan with 8 notes or 2 notes if they look really good or a bit dodgy. I wouldn't suggest you pick up any more, at the current rate of loans this should give you a very good spread of loans so the effects of individual defaults are less painful. (they will still happen, expect this)


OR, do most people set up some sort of direct debit system so that they don't have too much sitting idle in Harmoney's system?

If you are investing quickly, put it in, in large chunks. Having a larger amount available to invest (Funds Available) influences the amount of Auto-Lend loans you pick up (Auto-Lend favours a higher Funds Available to Outstanding Principal ratio). If you are only looking at 2 months, you're not going to lose much in interest (or whatever), probably best to split it in two and top-up at the end of the first month or when it runs low.


I have to say that Harmoney's system seems a lot more complex.

I'd call it more flexible and user driven - I find it much better :)

[kiwi783]

I did have a search through the forum but couldn't find much specific experience.
What has been peoples experience with the tail end of Harmoney collection process and recovery process. After a year of conservative investing in A's and B's starting to hit first persistent arrears - I know for many of you that's good going but the already lower than platform returns will take a hit.
I appreciate this is all unsecured lending but with A's and B's the borrowers often significant assets even if our claim may be last in a long line. What is the Harmoney recovery effectiveness (if any) like? Harmoney t&c's simply refer to "an outsourced recoveries team. If applicable, Harmoney will also begin legal proceedings." Any experiences from the longer serving and members here?
Thanks

[icyfire]

It makes one wonder how hard Harmoney (or its outsourced recoveries team) tries to recover money when the expectation for investors to experience defaults is already there. It's normal for every investor to have defaults so why bother trying hard.

The other question I have is, are borrowers who've defaulted on their Harmoney loans previously allowed back on the platform in the future?

[777]

What annoys me is that there is no explanation from Harmoney for each default as to how or why they defaulted and to what effort they made to recover the debt.

[permutation]

What annoys me is that there is no explanation from Harmoney for each default as to how or why they defaulted and to what effort they made to recover the debt.

I have noticed today that one of my defaults has gone current again, but the $ default total remains as it was before. I have looked at the loan but can not figure out what the story is!
Loan 78054 anyone else have the same?

[kiwi783]

I assume that Harmoney are losing their share of fees off lost future payments so they do have some incentive.
However, from my cynical side - what stops Harmoney doing very little, setting the loan status to "charged off" in the investors books then in time recovering or selling off the loan and not reporting it back to us.

[777]

I have noticed today that one of my defaults has gone current again, but the $ default total remains as it was before. I have looked at the loan but can not figure out what the story is!
Loan 78054 anyone else have the same?

Has it ( or any of your written off loans) got a balance in the "recovered principal" box.

[Saamee]

Has it ( or any of your written off loans) got a balance in the "recovered principal" box.

Unfortunately I have never had the luxury of that happening on my HM account - Even thought I have a collection of Written Off loans :(

[permutation]

Has it ( or any of your written off loans) got a balance in the "recovered principal" box.

I have not received 1 cent in the "recoveries" Box!!

[myles]

The Investor Agreement, https://www.harmoney.co.nz/how-it-works/legal/investor-agreement, actually covers a lot of what has been asked in some of the recent posts. Clauses 55 - 62 in particular on Rights and Collection Services.

You can't really expect Harmoney to tell each investor what is done on each individual loan recovery, can you? They are not allowed to provide any specific details and it's carried out by a collection agency. General details of the process are provided by Harmoney, that's about all you could reasonably expect? They are not going to spend more money on recovery than they are likely to get back - if they did, you still wouldn't see anything and Harmoney would be throwing good money after bad (and would likely have to increase their fees)...

Harmoney are required to pay to the Investor any recovered money above the cost of recovery. They are not sneakily going to take this off you - that is in the agreement. Do you really think Harmoney would risk it's business by doing something like that?

By investing in Harmoney, you take some risk, this is it, you accept it when you sign up...

[Art]

I have noticed today that one of my defaults has gone current again, but the $ default total remains as it was before. I have looked at the loan but can not figure out what the story is!
Loan 78054 anyone else have the same?

Yep - I have that one too and have noticed the same as you. I presume that Harmoney will get around to transferring the charged off amount back over to the ppl due column shortly by reversing the charge-off, the recent payment received has created a negative principal amount.

[Art]

I did have a search through the forum but couldn't find much specific experience.
What has been peoples experience with the tail end of Harmoney collection process and recovery process. After a year of conservative investing in A's and B's starting to hit first persistent arrears - I know for many of you that's good going but the already lower than platform returns will take a hit.
I appreciate this is all unsecured lending but with A's and B's the borrowers often significant assets even if our claim may be last in a long line. What is the Harmoney recovery effectiveness (if any) like? Harmoney t&c's simply refer to "an outsourced recoveries team. If applicable, Harmoney will also begin legal proceedings." Any experiences from the longer serving and members here?
Thanks

My experience, $952.45 charged off, $2.97 recovered (Sept & Oct 2016), I must say I had expected to see a bit more than this trickle through.

[icyfire]

Harmoney are required to pay to the Investor any recovered money above the cost of recovery. They are not sneakily going to take this off you - that is in the agreement. Do you really think Harmoney would risk it's business by doing something like that?

By investing in Harmoney, you take some risk, this is it, you accept it when you sign up...

History has shown us that there is a degree of dogginess in the finance industry. Harmoney already have a stained track record (http://www.comcom.govt.nz/the-commission/media-centre/media-releases/2016/harmoney-fined-292k-for-misleading-marketing-campaign/) when it comes to doing business by the rules.
Yes, there is a level of risk investing in p2p loans but anyone who buries their head in the sand and hopes for the best will potentially end up the same way as the people who lost billions of dollars from finance company collapses (https://en.wikipedia.org/wiki/Finance_company_collapses,_2006-12_(New_Zealand)). It's still early days and only time will tell but never stop asking questions.

[777]

Unfortunately I have never had the luxury of that happening on my HM account - Even thought I have a collection of Written Off loans :(

Here is my best one. Original loan $250.00

CHANGED-OFF DATE: Jan 8, 2016
AMOUNT IN ARREARS:$0.00
CHARGED-OFF PRINCIPAL:$220.79
RECOVERED PRINCIPAL:$205.19
NET CHARGED-OFF:$15.60

[myles]

Harmoney already have a stained track record (http://www.comcom.govt.nz/the-commission/media-centre/media-releases/2016/harmoney-fined-292k-for-misleading-marketing-campaign/) when it comes to doing business by the rules.
This type of over zealous marketing occurs every other week - in any/all markets that sell something...banks are notorious for it... If you read the details, Harmoney actually still required the correct process to occur, so I'm not sure how it relates to the discussion of debt collection?


Yes, there is a level of risk investing in p2p loans but anyone who buries their head in the sand and hopes for the best will potentially end up the same way as the people who lost billions of dollars from finance company collapses (https://en.wikipedia.org/wiki/Finance_company_collapses,_2006-12_(New_Zealand)). It's still early days and only time will tell but never stop asking questions.

Flumbphs, is the sound I've heard when others bury their heads in the sand, apparently you don't hear it if you do it ;)

Quite a different scenario from the financial collapse - not really seeing the correlation - you get to/must, choose what risk level you invest in, minimal change of hands, and it's very clear where your money has gone?

[icyfire]

Quite a different scenario from the financial collapse - not really seeing the correlation - you get to/must, choose what risk level you invest in, minimal change of hands, and it's very clear where your money has gone?

The risk level for each loan is calculated by Harmoney's own formula and there is nothing stopping the borrower from using the loan for a different purpose than originally indicated. It's not quite black on white as it seems.


Quite a different scenario from the financial collapse - not really seeing the correlation

This time is different! You hear this a lot but I don't believe the hype.

[myles]

The risk level for each loan is calculated by Harmoney's own formula and there is nothing stopping the borrower from using the loan for a different purpose than originally indicated. It's not quite black on white as it seems.

This time is different! You hear this a lot but I don't believe the hype.



Hype??? Hmm, I suspect you don't have a good understanding of what happened in the lead up to, or during the GFC? If you can see some similarity, okay then...

[kiwi783]

The Investor Agreement, https://www.harmoney.co.nz/how-it-works/legal/investor-agreement, actually covers a lot of what has been asked in some of the recent posts. Clauses 55 - 62 in particular on Rights and Collection Services.

You can't really expect Harmoney to tell each investor what is done on each individual loan recovery, can you? They are not allowed to provide any specific details and it's carried out by a collection agency. General details of the process are provided by Harmoney, that's about all you could reasonably expect? They are not going to spend more money on recovery than they are likely to get back - if they did, you still wouldn't see anything and Harmoney would be throwing good money after bad (and would likely have to increase their fees)...

Harmoney are required to pay to the Investor any recovered money above the cost of recovery. They are not sneakily going to take this off you - that is in the agreement. Do you really think Harmoney would risk it's business by doing something like that?

By investing in Harmoney, you take some risk, this is it, you accept it when you sign up...

We do sign up knowing that we will never know loan/borrower specific detail but now that the platform has existed for a longer period I do think that more portfolio level experience and information could be given - perhaps legal status or actual recoveries by time by risk grade - so that people can start to consider the full life cycle. This would also address to some extent the uncertainty that is created by the information vacuum at the moment (and as mentioned in another post - the past experience of finance industry in general)

As an aside, knowing more (at summary level) about how successful Harmoney and its agents push on this part of the process enables us to consider in more detail what is acceptable risk from an investment (and moral) perspective. When I see some of the loans being listed I wonder if the borrowers are either financially naive or are starting to test/believe/figure out that the Platform is a soft touch. And when I see relatively safe risk categories being assigned to these loans I wonder also if the right balance has been struck - and it is only at the very end of the (sometime messy and protracted) process that we know for sure.

[icyfire]

P2P investing is in its infancy in NZ, no one can predict how it will play out in the next few years. Hopefully, history will not repeat itself again.

[RMJH]

History has shown us that there is a degree of dogginess in the finance industry. Harmoney already have a stained track record (http://www.comcom.govt.nz/the-commission/media-centre/media-releases/2016/harmoney-fined-292k-for-misleading-marketing-campaign/) when it comes to doing business by the rules.
Yes, there is a level of risk investing in p2p loans but anyone who buries their head in the sand and hopes for the best will potentially end up the same way as the people who lost billions of dollars from finance company collapses (https://en.wikipedia.org/wiki/Finance_company_collapses,_2006-12_(New_Zealand)). It's still early days and only time will tell but never stop asking questions.
P2P has a major difference to a finance company in that there is no liquidity risk.

[Saamee]

P2P has a major difference to a finance company in that there is no liquidity risk.

Another good point I feel. is that there is NO OBR risk should a major NZ bank fail!

Obviously apart from any funds on deposit or not yet drawn down by a borrower at HM \ LC \ SM etc

[kiwi783]

My experience, $952.45 charged off, $2.97 recovered (Sept & Oct 2016), I must say I had expected to see a bit more than this trickle through.

Thanks. What risk grades were these? I expect A's and B's in general do better than D's and E's but I don't know. I have no idea of time frame to expect post charge-off - it could easily be a year or more before the peak of any possible / cost effective recovery is reached?

[kiwi783]

Here is my best one. Original loan $250.00

CHANGED-OFF DATE: Jan 8, 2016
AMOUNT IN ARREARS:$0.00
CHARGED-OFF PRINCIPAL:$220.79
RECOVERED PRINCIPAL:$205.19
NET CHARGED-OFF:$15.60

Excellent. Well done. 93% recovery - if only they were all like that. What was the loan risk grade and time to recovery?

[myles]

As an aside, knowing more (at summary level) about how successful Harmoney and its agents push on this part of the process enables us to consider in more detail what is acceptable risk from an investment (and moral) perspective. When I see some of the loans being listed I wonder if the borrowers are either financially naive or are starting to test/believe/figure out that the Platform is a soft touch. And when I see relatively safe risk categories being assigned to these loans I wonder also if the right balance has been struck - and it is only at the very end of the (sometime messy and protracted) process that we know for sure.

I guess there is a tradeoff of how much info can be given, the time it takes to collect it (from the borrower) and its accuracy. If Harmoney added an 'Outgoings' type figure, would that make the difference in the initial decision making? What else could reasonably be provided?

The process of application is outlined at: Application Process (https://www.harmoney.co.nz/how-it-works/application-process) which gives an indication of what Harmoney have available to determine their Risk Grading.

The summary level stuff for risk is there - risk grade defaults rates and hazard graph (https://www.harmoney.co.nz/investors/investment-risks) - just how up-to-date these are, and over what period they are compiled from is questionable.

The process up to a charge off is well documented: Collections Process (https://www.harmoney.co.nz/how-it-works/collections-process) there are some penalties for borrowers at the 60-90 day stage e.g. registered as having defaulted, which in theory makes it much more difficult for the borrower to get a loan again.

Harmoney provides the following meaning of a charge off:

A charged off status indicates that a Borrower has defaulted on their loan, primarily due to bankruptcy, sickness, job loss, death, or other unforeseen circumstances. Typically, this means that we’ve exhausted our collections efforts and there’s a low statistical likelihood that we’ll be able to collect any funds from the Borrower; resulting in a capital loss for Lenders.

Bold added by me and I accept this and factor in that any charge off's are lost (any returns would be a bonus).

I'd like to see a more 'current' and more well defined risk grade defaults rate and hazard graph - which is all you could really base your investment strategy on anyway? The issue with these type of figures is that they are at a summary level - if you selectively pick loans based on 'your own' criteria, these rates may no longer apply (for better or for worse). Also the risk of default today, may be quite different to the risk of default tomorrow. :(

[Art]

Thanks. What risk grades were these? I expect A's and B's in general do better than D's and E's but I don't know. I have no idea of time frame to expect post charge-off - it could easily be a year or more before the peak of any possible / cost effective recovery is reached?

Although E & F grades are only 15% of my investments $765 charged off out of $952 were in those grades. Most of these charge-offs were over the last 6 or so months, so I don't know whether I might start seeing some recoveries later. Possibly the first few instalments paid to a debt collector might be applied to the Debt Collector's and Harmoney's debt collection/bounced payment fees? - I don't know what the procedure is with that. Would be good to hear if investors with older charge-off balances are starting to see many recoveries.

[myles]

Although E & F grades are only 15% of my investments $765 charged off out of $952 were in those grades.

Interesting - if you apportion a single unit to each Risk Grade Default rate (total them), the total defaults for E and F is 74.53 and the default rate for A, B, C, D is 19.47. Apply that ratio to your total 952 (952*74.53/(74.53+19.47) gives a value of 755, very close to your actual 765 - perhaps indicating that Harmoney default rate values are on the money?

Haven't factored in the 15%, whoops... Would you be willing to post your other grade percentages to rework this to see how close the provided rates are to yours?

[jmacka]

I find myself very fortunate for only having $248.12 charged off so far. There has been only $1.70 in total recoveries. The loans charged off range from grades D2-F5.

I noticed the $1.70 came through shortly after the loan was charged off, that was back in... December 12th 2016.

I did mainly choose my loans based on income to loan repayment ratio. I say "did" because I haven't invested in Harmoney since early March and have been moving all my money gradually over to another platform, as the money comes rolling in.

[jmacka]

I've been looking through the Lender FAQ's, but cannot find what I'm looking for. There used to be a part about recoveries, how much Harmoney expected to recover back for us etc.

I do however see this - "We have forecast a 4% static loss across the portfolio over the life of the loan. This means that out of every $100 invested, you could expect $4 to charge off." - extract from Harmoney.

[777]

Excellent. Well done. 93% recovery - if only they were all like that. What was the loan risk grade and time to recovery?

Loan 8586 30/12/14 E3 36 months

Repayment since charge off date 8/1/16 were 23.71+11.10+22.95+26.79. The last payment was yesterday.



D1 E2 C3 C2 D1 are the grades of my other charge offs. One only made one payment. One has recovered 3.68, the rest nothing

[IntheRearWithTheGear]

What i suspect harmony do ?

They have or had access to large amount of loan data - each of those loans has properties such as married, income job type, loan ratio etc, has a pet, credit score.

They then look at the outcomes of those loans - didnt pay, paid, paid early etc.

Workng back from the outcomes - they predict the ratings a1, a2, a3 , f1 ,f2 ,f3 based on the attributes to outcomes. So on a global scheme over many loans - harmony is correct, prediciting which loans default individually - they can only come up with a probability.

Add a fudge factor in and you get your return.

In a recession the data will not be indicative - hence the risk.

Out of interest you can find lend lending clubs data set here.

https://www.kaggle.com/wendykan/lending-club-loan-data


Cheers

[myles]

When I see some of the loans being listed I wonder if the borrowers are either financially naive or are starting to test/believe/figure out that the Platform is a soft touch. And when I see relatively safe risk categories being assigned to these loans I wonder also if the right balance has been struck - and it is only at the very end of the (sometime messy and protracted) process that we know for sure.

An interesting read, Lenders Responsibility Principles (https://www.consumerprotection.govt.nz/consumer-law-and-your-rights/credit-and-finance/lender-responsibility-principles/), which Harmoney are required to adhere to...