Originally Posted by
IntheRearWithTheGear
Yeah, but a and b loans suffer at a higher rewrite ratio than the e,f risk loans - that alone erodes your real return. You may also have your capital eroded depending on when the borrower rewrites which you cant offset to your tax payments.
So at a individual loan level - it dosnt look as good as it used to - but now over a group of loans it kinda equalises out (not perfectly but you get the point).
Your not charged on your capital and your capital can be reinvested into another loan. Rewrites have zero effect (that i can see) - we dont care if harmony chases the borrowers for rewrites and everybody is happy. This rewrite side of the business would be a sore point for harmony and us investors.
SO they are charging you at higher rate of interest but on a smaller portion of your loanbook ie less the capital amount you invested - at the moment they are charging your capital plus interest.
One of the issues this new cost is more upfrount than over the duration of loan - which impacts on the compounding of loan amounts.
The reason im interested so much is ive being trying to write a program to calculate out the loan books - so that i make the best decision on how to invest for example loans compounding into other loans.
So for example imagine a system which mimicks defaults and rewrites over thousands of different loans and spits out a number. They have provided enough information to do this. The piece missing is a rewrite profile - which now dosnt matter. For example ive seen mentions of 20% rewrites but skews depending on risk profile.
I got the system but i cant prove the results are correct - so i just keep my mouth shut.