There was a thread for this but it went missing with temporary bannings.
I am interested in how any investors are going. Have you had many defaults yet?.
I have been investing for about 7 weeks now and so far all those that are due have paid up.
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There was a thread for this but it went missing with temporary bannings.
I am interested in how any investors are going. Have you had many defaults yet?.
I have been investing for about 7 weeks now and so far all those that are due have paid up.
Sorry I know I should really look through the website, but what happens when someone defaults?
My experience matches Black Knat exactly.
Unfortunately my bank balance doesn't. Invested in over 100 loans but only 1 or 2 notes in each. Focusing on D and E 36 month loans.
From what I have read on overseas experience, the default rates are about right so you are rewarded for the extra risk. Whether Harmoney has got it right like lending club and prosper, only time will tell.
Good to know a few of us around investing. I tend to stick to the 36 month ones and B's thru D's. Usually in 10 unit lots. Reasonably time consuming and you have to be watching a lot as many loans get filled quite quickly.
Interesting only two loans showing on market at present.
Will keep you posted on any failures when they occur.
At the moment I have 10 loans in arrears, suddenly up from one. Could be that people have over-spent for xmas etc. or maybe the banking system is out of wack with the harmony system during the holiday period???
When you say "in arrears", have you been informed of that or are you calculating that yourself. Remember that there is at least 3 business days before you see the payment credited against your loan and with the public holidays effect, this will affect both the borrowers payments being debited against their account and therefore the receipt by Harmoney. Then the 3 days to show up for you.
Re the arrears, yes I have been informed by harmony that there are 10 loans in arrears totaling $43. I have checked through all other loans due about the same time ie. 23-24th Dec and one or two are paid up but the 10 are not. However I am pretty sure it is due to the 3 day thing at this time of the year. We will know more on the 3rd of Jan I guess.
Re arrears, I always have them. Sometimes it is just the first pay,ent not being set up properly from what I can tell. They always seem to get paid (with very little in penalties).
Having said that, I am starting to get concerned with the quality of some of the data. It sometimes fluctuates throughout the day in a way that can't be reconciled - outstanding reduces even though no payment received.
Two E1's there today. Each with different interest rates. One has a lower rate than the D4 showing.
LAI-00003583 E1
68.4% 5,300.00 22.94% 4.4%
LAI-00008726 E1
12.26% 5,300.00 24.66% 2.78%
LAI-00008731 D4
5.8% 10,350.00 22.96% 2.21%
21 loans now in arrears totaling $97. More than 20% of my notes. I still think (and hope) it is the holiday banking dates. Anyone else in the same boat???
No arrears now. Thin on the loan offerings at present.
I have a number of loans that are repaying more than once monthly.
My $97 of arrears now down to $11 but no increase to late payments which have stayed at 0.44 cents. I find it difficult to reconcile total value at any one time due to uncleared amounts. I have started investing again after holding off for a month to see how things were going. I am still not sure if I will increase my rate of investment or not at this stage but all in all it does look promising.
I met someone involved with Harmoney who was explaining it to me a few months back and meant to have a play then but I completely forgot about this site. So thanks for posting here 777 and reminding me. I have put 1k into my account this week so lets see how it goes - I always assume the worst in these sorts of things, that way I can be pleasantly surprised. :-)
I wanted to set up an account but can not get past the disclosure agreement. Repeatedly get a message telling me to confirm at the bottom of the page that I've read it but there is no OK button at the bottom of the page. Have had 2 other people look at it for me in case I was missing something but same result. Any idea anyone ?
Do any of you have unfilled orders that now do not appear on the Marketplace page?
It appears loan did not go ahead. No notification. You just need to work it out yourself.
Yes, I had a couple of those back in Sept/Oct. No notification then also. I called about it and was told that the loans were unfilled. Since then all I have invested in have been filled. Also, I have had two loans fully re-paid, one almost at issue time, the other within one month. Got a $2 return from that one!!
How many loans are up all the platform at once? Could you spread for example $50K across a decent number of loans to minimise the default risk/exposure?
no
Currently 22 loans (only 2 meet my criteria). Over the course of a few weeks you could (depend on what your criteria are). Say 100 loans at $500 max is descent spread. I would do it slower though as $500 per loan is a lot.
There are others here that have invested that much so they may let you know how long it took, and the max they put into each.
Not many at any moment in time but there is fairly regular movement in terms of completing financing of individual loans and new offers arriving. If you believe the numbers they stated in various media blurbs it implies they have completed 1,400+ loans since start up ($20m in loans, $14,000 average).
If you wanted to invest $50,000 it might take a while depending upon your risk tolerance. I note Harmoney recommend you purchase no more than 10% of a loan but would suggest unless you are investing millions this would represent an unwise degree of concentration risk for sums like $50,000. Think wiser to take your time and buy into hundreds to allow more room for the pricing vs default statistics to work as designed.
I've been buying into many loans at small values on behalf of my partner to achieve wide diversification since there is no control or visibility of the underwriting/risk assessment process. Based upon desired criteria have over 6 weeks bought into 70 or so loans so far. We intend to continue purchases at the same sort of pace for 3 years assuming the numbers and Harmoney (and their assessment process!) performs as expected.
What's the tax situation for lenders? Do Harmoney deal with the RWT? Is it tax free?
I just signed up today and tried to invest a small amount, but apparently there aren't enough loans on the marketplace. Is that a sign of not many borrowers, or has the recent media attention created a flood of investors? I hope it's not normally this hard to find loans to invest in!
There is over a page of loans currently which is good for them - have very rarely seen 3 pages and have had them run out completely. I understand they drip feed them to the market so as those get taken up, they will be replaced.
Of the 2 pages currently, only 2 meet my criteria.
Ive never used quick invest. What rate did you ask for?
It is pretty quick using the filters to fine loans you are interested in (for me C-E 36 month). When I was investing, I would guess I would average about 10 loans (so multiply that by the number of notes per loan you want to get $ amount) a week ( I did weekly deposits). In some cases this only took a day, in others it took the whole week to find them. In others I found them quickly but they expired without filling fully. It would probably be a bit quicker now so maybe expect 20 loans per week depending on how strict with criteria you are.
I didn't get to that stage. First you enter an amount (I tried low amounts like $500 and higher amounts like $3000) and every time it comes back saying there are no notes available.
Never mind, maybe I will look into it again when it gets more popular and there are more loans at any given time.
So I assume all other Trade Me uses got an email today promoting Harmoney like I did.
Hopefully this publicity will increase the demand for loans and give some supply easing for investors (if that was the case above).
Anyone else looking at investing in this?
Received mine this morning
Yes just signed up
Should have renamed it "Shark Me" or something similar. It will end in tears for the lenders; mark my words.
Yes will only be dipping my toes into this with an immaterial investment.
However I do think its an interesting addition to a portfolio.
P2P lending seems to have done well overseas, so much so that all the big banks are now buying them up.
I note that HNZ is already a shareholder of Harmoney.
Lets hope your toes don't get bitten off.
Banks got caught trading in deceptively packaged toxic debt around 2008. The P2P lending seems to lend itself (ha) to a similar marketable package. Hopefully my fears are unfounded and I've just been spending too much time hanging around conspiracy theorists.
I put in $500 a couple of weeks ago spreading it out over 12 loans. One of the loans was nearly all paid back within 24hrs and the rest about week later. $75 was in that loan. I was charged 88cents and received no interest. So a loss to me straight away.
Since it was the only transaction I could see that I made a loss on that loan. I find the balances take there time to adjust and find it a little bit confusing.
Was the 88c showing in your service fee? This will be the 1.25% of the principle & interest payments made to you (not 1.25% of the interest) if the loan is fully paid off within 5 days we get our principle back, with no interest as the borrower does not pay interest & no service fee applies.
I'd be interested in others thoughts though, the service fee is charged on every payment including a large payment that will fully repay the loan, e.g.I had $1000 in a loan that fully repaid after 61 days, I received $19 interest but will have been charged $13 as a service fee (I say will have been because the service fee is not shown against each loan, just as a portfolio total) I would have thought the fair way to charge a service fee would be on regular payments only. If a loan is paid off on say day 6, you would take a loss.
As I said, interested in thoughts.
The service fee should definitely not exceed the interest in my opinion. A bit less clear in your situation.
I wonder if there should be 1.25% early repayment fee (at least in the first 12 months of the loan) so the net effect to the lender is 0. If we dont have the option to call the loan early, even at a discount, why do they have the option to repay at no cost?
For what its worth my thoughts are that with all the dozens of finance company failures during the GFC what did we learn ? Basically a disturbingly large percentage of consumer credit goes bad in a GFC so in a GFC MK2 I'd expect lenders to get thoroughly belted. Makes this a fair weather investment only doesn't it ?
As a sidetrack while we are on the topic of service fees. Other P2P platforms refund the investor the service fees charged if the borrower defaults.
I think this is a good incentive for the platform (e.g. Harmoney) to ensure their underwriting process is robust and not simply approving loans to get the loan origination fee upfront.
[QUOTE=Mort;528822]Was the 88c showing in your service fee? This will be the 1.25% of the principle & interest payments made to you (not 1.25% of the interest) if the loan is fully paid off within 5 days we get our principle back, with no interest as the borrower does not pay interest & no service fee applies.
Hi Mort, yes the 88c is showing as a service fee. I received no interest.
I appreciate that but question whether it is right??
Really. I though the finance company's were brought down by over lending on second mortgages to questionable property developments.
Consumer credit requires the borrower to either leave the country, go into hiding or declare bankruptcy for the debt to go bad doesn't it?
I will be watching for an increase in consumer default but given share prices also fell during the GFC, the main disadvantage of Harmoney is that the investments are completely illiquid until such time as they introduce secondary market. That is one reason why I favour 3 year loans (over 60% of mine).
Lessons about Consumer credit from my experience with Geneva Finance.
1. Many people simply walk away from loans when times get difficult, others shift their address without telling their creditors.
2. Lend money to monkey's and they'll misbehave as sure as night follows day
3. There's the new short form bankruptcy procedure, no assets, liabilities under $40K that's only a 12 month one off from of bankruptcy that's costing consumer finance companies plenty http://www.insolvency.govt.nz/cms/fi...key-points-nap This is especially useful for people with credit card / consumer debt who's car has died. This relatively new procedure has become a nightmare for consumer finance companies.
4. If people are borrowing at high interest rates the only reason for this is the mainstream lenders have declined them, more often than not for very good reasons.
5. Even if you do get into an amended scheme of arrangement with loan defaulters they often don't make their payments or the payments are at some pathetic rate like $10 a week.
6. If borrowers don't have serious skin in the game, (like a decent 40% deposit on that car) and if serious mechanical problems ensue then option 3 can become more attractive.
7. young people are notoriously unreliable with consumer credit, sorry but they are.
8. Late payers and defaulters usually require weekly micro management which from an administration perspective is extremely onerous and time consuming.
9. Identity Fraud http://www.interest.co.nz/personal-f...pplying-credit
10. Conspiring with car / plant and equipment dealers to fraudulently hydraulic up the price to give the appearance of a proper deposit having been paid
11. Fraudulent alteration of supporting loan application documents for submission online, (easier than fraudulently altering them for application and inspection of documents in person)
Roger
1,2,4,6,10 Accept
3,5,8 This is the risk and I guess we have to hope Harmoney have their calculations correct in relation to the expected number of defaults. The rates I am receiving, account for expected defaults still have quite a large buffer for extra defaults over and above the rate I could get at the bank. Hopefully the risk/reward balance is correct.
7. you can control when choosing loans. The worst loan in my opinion is a young person wanting to go on an overseas trip. High risk they will like it and never come back (or more likely, plan a OE once they return).
9 Hopefully Harmoney has this covered.
I generally go for:
- small loan balances (so if their only debt, not worth dong short form bankruptcy)
- where the payments are less than 10% of income (gives buffer should they hve to take a lower paying job)
- which are 36 months (hopefully you would have received most your money before they default)
- over 30 (ie. not young)
- not for a holiday (dont trust someone who borrows at 20%+ for a holiday)
Hi Harvey
I like your front end filters. Honestly I don't know enough about their front end checks, operational procedures and methodologies for dealing with delinquent debtors to comment further.
I would say however that while fuel prices are low, this should be of significant assistance to people with consumer credit so delinquencies are likely to be lower than historical norms.
Good luck with it.
Thanks. It is only small money for me, and even compared to others on this forum who have invested a lot more.
Sorry if this has already been covered. I have just been looking into Harmoney and I was wondering - with Harmoney whether your loan "notes" that become bad debts or delinquent during the year could be deducted from your interest for tax purposes.
For example during the year, if you have $10,000 invested with Harmoney you may have earned $1500 interest but also $500 of your notes became uncollectible (even after Harmoney collection procedures). Would you be able to deduct the bad debts of $500 from the $1500 interest so that you would just declare $1000 income from Harmoney?
I know with listed bonds that if you sell the bond for a capital profit that profit is taxable whereas if you sell the bond for a capital loss it is not always deductible (for example where it was due to a reduction in credit worthiness). There is a type of lop-sided capital gains tax by stealth in NZ on financial arrangements.
No, it would be a capital loss.
The way Bad Debts work is that it is to offset income that has already been recorded but will not be received.
i.e. if you are a business and make a sale on credit, income is recorded. However if that credit goes bad and the income will never be received then you offset the income with the Bad Debt expense, thus the overall effect is nil.
With Harmoney, the loan payments are capital repayments, not income. Thus any payments not made are capital losses and not Bad Debt expenses.
Thanks for your answer. The taxation of financial arrangements rules blur the distinction between capital and income.
So, if you loan someone $1000 through harmoney and they pay back $500 plus $150 interest in the year, before being judged bankrupt, then you will have to return $150 as income. Even though the "financial arrangement" actually resulted in a loss for you of $350 (+500+150-1000).
If that is the case, it seems unfair that no allowance is made for that capital loss. When for example, you have to pay tax, under financial arrangement rules, on a capital profit when you sell a bond.
Your Harmoney investment will inevitably lead to paying too much tax. All Harmoney "notes" have a default % attached to them. Depending on the riskiness of the notes you invest in, you can expect to have some of your loan notes remaining unpaid in an average year. So over the long run, your Harmoney investment is income generative and capital depletive!
I have looked on the Harmoney website to see how it fits into the financial arrangement scheme - but could find nothing. I sent their investor helpline an email a few days ago - but no response.
You should be able to deduct the 1.25% fee from your taxable income.
Totally agree with inhuman regarding the fact that a default will be a capital loss.
It will be interesting to see what they provide for end of tax year. Especially in relation to right offs - bacause to the extent you have earned interest on those loans, that should come off your capital loss.
Have built a bit of VBA to run a modest Monte Carlo simulation to generate a range of defaults and gross returns.
The simulations maintained a close proximity to Harmoney's advertised default rates and timing yet still generated a wide variance in default values. It's a cautionary view for those "testing the water" with a small sum of money - it is essentially gambling on being fortunate.
The results also generated a simulated return 1% below the return Harmoney suggest should be achieved. I could have a logical or modelling method error somewhere but haven't found anything yet so am slightly suspicious of their methodology.
Attachment 7056Attachment 7057
Interesting figures. I think Harmoney have said that over time they may fine tune their default rate figures. Agree - Harmoney investments are a gamble with potentially high interest rates along with the potential for significant capital depletion.
As far as the tax accounting for the capital depletion, Harmoney FAQ states underForecast Annual return "This is the forecast return of the notes in your portfolio on an annual basis. It is calculated by taking forecast annual net income and dividing it by the outstanding principal. Forecast annual net income is interest less defaults and service fees. Defaults are calculated as the percentage of outstanding principal that is forecast to be written off as a bad debt over the next 12 months. "
The emphasis is mine. So it appears that Harmoney's net income calculation includes forecast bad debts. However whether taxable income allows a deduction even for actual bad debts, I do not know. I am more sure returned Taxable income would not allow for forecast bad debts or doubtful debts. It seems you need to refer to the law on financial arrangements, which is voluminous.
That's a very interesting simulation. I have a few questions for you.
I assume you ran this simulation across your own portfolio.
Is the wide variance in default values for grades E-F due to the small sample size?
Do you think the wide variance on default values would drop if an investor increased their investment perhaps to over 400 notes?
Why your default model slightly difference to Harmoney's? Did you use some software to read the default model chart from their site?
The XIRR yield is 18.1% from your simulations. What is the 'Net Yield' and 'Net Yield loss deductions' and why is it lower than the XIRR yield?
Very nice graphics, what software did you use to produce these?
If "bad debts" are not allowed to be taken into account for tax purposes then you will end up with a tax rate greater than 33% on the Harmoney definition of "annual net income".
As a matter of interest, for those with an investment with Harmoney, on average, what percent of your investment is in the Harmoney Investor Account (earning zero interest) compared to the proportion of your outlay invested in interest-earning "notes"?
It is probably much less than this in actuality, but if half your money with harmoney is sitting in the 0% interest account at any one time, then your xirr yield on your notes will need to be halved to get the yield on your total Harmoney outlay.
Yes, my wife's portfolio as of a week or so ago.
The entire portfolio is small so there is wide variation across the whole thing, it's just that a 100% movement on defaults for A1 notes will barely register because the base default rate is so low. But yes, to control this would need either a bigger sample or more simulations than the 300 per note I ran.
Keep in mind though that by running 300 simulations the sample is 193x300 or 57,900 data points - any single simulation is random but in aggregate this won't be too bad.
You would certainly expect to see the core results narrow (particularly between the 25th and 75th percentiles). I've run the basic model dozens of times and the median point for default value has varied between 5.2% and 5.6%. My instinct is that a sample size of 400 would not get you close enough to certainty but it's better than 193! Remember though these are multiple simulations - in real life you only get to push run once.
I just copied their default by credit rating stats to a local table and replicated as best I was able their default time-line chart (this was an image on the Harmoney site, not a table).
The difference could just be natural statistical variation - I ran 300 random simulations using the default rates as business rules for comparison with randomly generated numbers. You would not expect this to be a perfect match. However, my aggregate result in both default rate (how many notes defaulted) and default timing (which month they defaulted) remained very close to Harmoney's model. So I was a little surprised (but not panicked) in the 1% difference in projected returns. It could just be down to differences in calculating the yield - I used the Excel XIRR method, there are alternative approaches.
This aligns to the current tax debate on the thread. I wasn't sure if some/all loan losses would be deductible. So the net yield just assumes 28% tax on the return before loan losses and the loss deduction version allows these to be expensed before 28% tax is calculated. The difference is not far off the projected British experience - they are allowing loan loss deductions in a couple of months and expect net investor returns to benefit by about +25%.
Just Excel. The general design approach (type of charts, monochromatic, stripped bare/little framing etc) is current best practice thinking on data visualisation.
Happy to share although I'm not pretending the model itself is best practice.
If you don't mind give me a couple of weeks to improve the speed of the code; I built the VBA one feature at a time and now it runs quite slow. This will become a big problem when there are many hundreds or thousands of notes. It just needs a little bit of thought to improve...
While it does take a while to get money invested, once fully invested, I would have less than 1% in the investor account at any one time. This does mean you need to check every day or two to see when you are over $25 and need to invest again. Loan notes are now closing quick now so it is very rare to have money sittin in the 'in funding' account for more than a day so that might be another 1% of the portfolio.
I actually had negative in my investor account at one point. I assume a deposit into my account was incorrect but by the time they reversed it, I was already reinvested.
The tax situation is interesting - I invest via a company which is in the business of investing (primarily shares on capital account) but also now loans via Harmoney ( the capital/revenue line is blurred by the FA rules). Will this allow the company to claim the bad debt since it is in the business of investing? Figures crossed for the next 44 or so days that I dont have to consider it for this tax year.
I would recommend speaking to your accountant, however I highly doubt it.
The structure of the investment does not matter; it is the intent behind each individual investment that is important.
i.e. if you buy shares or property with the intent to sell at a profit then that capital profit becomes income and thus taxable (what you currently have in your company).
This does not apply to Harmoney as there is no intent at the time of issuing each loan note to make a capital profit (no loanees will of course pay more than 100% of the principal).
The only intent at the time of issue is to purely receive interest income.
Thus only the gross interest, RWT paid and the management fee expense will apply to anyone’s tax return, regardless of structure.
The reasoning behind keeping shares that are on capital account separate in a different entity than shares that are on revenue account is purely for simplicity come accounting for tax payable. The structure itself does not influence how the investment is treated.
Agree.
I was more thinking along the lines of 'in the business of' rather than capital revenue. A bank can claim a deduction for bad debts because it is in the business of making loans, some of which are expected to go bad. That is exactly the same position as my company. As I said, I haven't looked at it at all but it does seem unfair where I am investing in something where I expect an x% default rate, that I cant get a bad debt deduction. Hopefully I never have to answer this question but I doubt it.
Thats an interesting way to look at it, I would also like a definite answer.
In the UK at least deafults on P2P loans are capital, I would assume they would be the same here.
http://www.ft.com/cms/s/0/854e01d6-8...#axzz3RrJcqpj2Quote:
Zopa co-founder Giles Andrews says the way income tax is charged on peer-to-peer lending is unfair.
“It allows lenders to offset our fees against interest earned for tax purposes but not losses from bad debts,” he explains. “Obviously, the net returns would be much higher if lenders could do so and it’s something we have been lobbying for since we launched.”
As I understand them, under FA rules you do not necessarily have to be "in business" for capital profits to be taxable. So perhaps under FA you do not have to be in business to deduct delinquent "notes". However, since you may have seen quite a few notes being redeemed and invested in during the course of a financial year, perhaps that would be enough for you to actually be "in the Business" of dealing in the "notes"?
Disc - As most of you know I'm an accountant. I am extremely reluctant to give an answer to this deductibility question as I am fairly sure this is something that will be subject to litigation with the IRD in due course. This isn't clear-cut and its an entirely new investment product. In my opinion much will depend upon the circumstances of each investors case. If you're clearly a professional investor and the size of your investment in Harmoney is substantial and spread over a substantial number of loans AND the level of proven bad debtors was significantly more than the expected delinquency rate as modelled by Harmoney I think there's a reasonably good arguable case that those losses are deducible under the general provisions of a necessarily incurred business expense. For smaller investors it could be possible to make a case that delinquent debtors are an ordinary and expected cost in making this sort of investment i.e. just like the commission that Harmoney take out.
Not worth a binding ruling (unless Harmoney did a product ruling) but maybe someone should submit a question for a QWBA (is there a formal way to do that or do they just answer what they want?).
For those wanting more info, I think this is the relevant section: http://www.legislation.govt.nz/act/p...LM1513650.html
Most punters would fall under subsection (2) (deduction limited to accessible income) but a deduction can be claimed for capital loss if you fall under subsection (3). The question being does holding hundreds of loan notes make you a person who "carries on a business for the purpose of deriving assessable income that includes dealing in or holding financial arrangements that are the same as, or similar to, the financial arrangement"
The bigger your investment in Harmoney the stronger your case that you are in business IMO.
Not sure Harvey. Lots of TIB's, (Technical Information Bulletin's) with questions we've been asked and answers...one wonders how many questions they've been asked that they haven't answered ???
There's so many variables. Anything from a single individual investing say $500 to a professional investor (company / individual, joint investor / trust) with a multi million dollar portfolio investing a six figure sum I'm not sure they would know the answer to a generic question of loss deductibility on this new investment product. Case law will surely develop over time.
I would have expected Harmoney to have sought legal advice as to what constitutes taxable income for an investor as they are obliged to deduct RWT from it.
On their Investor-faq page they state under "How is Forecast Annual Return (FAR) calculated?":
"... Forecast annual net income is interest less defaults and service fees. Defaults are calculated as the percentage of outstanding principal that is forecast to be written off as a bad debt over the next 12 months."
So it seems that Harmoney would consider actual net income to be interest less actual defaults and service fees. I am presuming that defaults are the value of delinquent notes. Would Harmoney consider that this actual net income be the taxable income to be entered on an investor's tax return?
I have sent an email on this point to investor enquiries. Eventually I got an answer which stated that Harmoney may choose to take legal action against defaulted borrowers to recover costs. In other words my question was not understood. Maybe someone else could send an investor enquiry on this point.
The income bit is quite settled. It is any money coming in and to the extent it is interest, they withhold RWT.
The question is whether bad debts are deductible and the answer is murky and probably depends on the individual investors personal situation so not something Harmoney can answer (and neither can the IRD unless they put your account into dispute - you cant even get a binding ruling as the more I think about it, the answer is a question of fact, not law).
Re their 'annual net income', I think this is misleading as most think of net interest as after tax but they only mean net of defaults. It is not a tax effected number.
There's always the prospect of Taxation Review Authority decisions in due course and the prospect that if they're challenged in court the Judge may give a ruling that gives a view on general deductibility criteria notwithstanding the specific aspects of the case.
For my money it's a lot easier, (more time efficient and potentially far more rewarding as well as probably far less problematic), to invest in HNZ shares and let them take care of all the administration. Just sit back and allow the fully imputed dividends to increase my investment via shares in lieu of dividend and watch the share price increase over time :)
Harmoney could be a name that's suggestive of an investment experience that could prove to be anything but that for some investors...just saying.
Remember Geneva finance that was such a sweet name that was suggestive of a Swiss financial institutional banking experience ?...an Omen for Harmoney ?
Post #53 sum's up my concerns in a nutshell. Who needs the potential aggravation ????
The time to avoid Harmony will they get a big name on TV telling us great they are .... both as a lender as well as somewhere to invest
Somehow I feel I had God on my side when I failed who I am test and got rejected out of hand
Say $100k with Harmoney (which would be alot!) and say 25% default (higher than they predict) so $25k loss in a year. But part of that can be offset against interest income so say $20k capital loss. Tax on that is under $7k. Unless this is multiple years (4 years x $7k) or there was a total market collapse (losses greater than $25k) then the cost to go to court would exceed the tax in question. And that is someone with a big holding who is more likely to claim they are in the business so less likely to be pursued by Inland Revenue.
Yep...I decided to quit that post. People will simply have to live with the uncertainty of whether they can deduct untoward delinquencies or stump up the cost of a binding ruling. From my experience with Geneva finance delinquency modelling with consumer finance is usually woefully inadequate. Who knows, maybe these guys are smarter than the management at Geneva, (which wouldn't be hard) or perish the thought, maybe they're worse :eek2: Good luck :)
Heartland have invested $17m though Harmoney. Assuming the risk assessment is exactly the same for wholesale and retail investors (which I assume it is), then Harmoney must be happy with their algorithms.
Does instill a bit of confidence.
As an investor, you do have to trust/believe they have a robust credit grading model which can accurately predict repayments and the probability of defaults.
The guys running Harmoney come from a traditional finance background so I assume they are using a battle-tested credit model.
But only time (3+ years) will tell if their credit model is any good...
discl. minor investor in Harmoney
This is one helluva leap if it happens http://www.interest.co.nz/news/74202...ortgage-market
Thanks for the link. I guess it is not surprising as so much personal debt in NZ is tied up in residential property. I feel a caveat here may be that Harmoney may be in the segment of the market that has been turned down by the established players, so may be more susceptible to a popping of the ever-inflating bubble?
Interesting but they will need a lot more funders to make it work. This is the bit that I found facinating:
So for a $100k mortgage, they first $80k could be grade A and gets repaid first and the next $20K could be Grade B and gets repaid last but does receive a higher interest rate. Effectively a first and second mortgage in one.Quote:
With a mortgage you get the opportunity to have subordinated debt so you can actually fractionalise a single mortgage and take proportions that are risk weighted.
Who said retail. Only 20% of loans are invested in by retail if my recollection of the story is correct. In the US, funds are starting to invest via these sorts of platforms. Expect the likes of some kiwisaver and Superannuation providers getting exposure to debt via this. The biggests issue I see for NZ is getting enough investors to fractionalise a $500k+ mortgage.
Depending on where we are in the economic cycle will affect the allowance in expected annual return for bad debts. When calculating its Forecast Annual Return for the investor, does Harmoney make an allowance for early repayment by the borrower? As discussed earlier, the investor is still charged a % on capital repaid, even on early repayments. If many loans are repaid early then it will have a material effect on investor returns. I imagine there must be a calculable probability of early repayments for each loan grade.
Those of you investing with Harmoney, is your dashboard updating. Mine has not for close on two weeks yet the amount of money available to invest (as shown on the market page) is increasing with repayments and interest.
Losing faith in their administration.
Pretty sure mines updating. The 'amount invested' on mine is out by $200 which they haven't fixed even though I have advised them. Waiting till they do their first update before I flood them with feedback as no doubt they are aware of most of the issues with the current site.
Thanks HS. They are not inclined to keep you updated on queries. May be due to incompetence or simply because of the magnitude of queries. I am close to just taking back money as it comes due and forgetting them. 95% of my loans are for 36 months and total about $26,000. The whole deal lacks transparency for me.
You win some and lose some.
Hi everyone, I have invested at harmoney as well. Do you know what happen if the borrower missed a repayment. It seems a few of them should make a payment on 11/03 but didn't or hasn't show up on the website?
I think it may take a day or two to hit your account - could be wrong. If they haven't paid it will show up as 'amount in arrears' on the Dashboard - my performance page. If they dont pay within a week, then I think penalties start accruing.
I constantly have a small amount in arrears but non have been treated as a write off and very few additional penalties have been accrued.