BORROWER COMMENTS: continue to save for a house - on a $28K loan... WTF
From memory I think I read that Harmoney are audited by PWC annually - this would/should include the entire borrow/loan process. PWC don't miss much.
Printable View
BORROWER COMMENTS: continue to save for a house - on a $28K loan... WTF
From memory I think I read that Harmoney are audited by PWC annually - this would/should include the entire borrow/loan process. PWC don't miss much.
To hold a peer-to-peer lending licence the FMA require an Annual Audit - so it will be happening. I doubt they would make it public if that's what you're after?
The Platform RAR had a pretty big drop today from 11.03% to 10.33%
It appears all the RARs have been reduced have a look at the platform charts. My personal rate has gone down by the same amount, 14.87>14.18%, even though it is usually one week behind and normally changes on a Sunday..
It would be nice of Harmoney to explain what they are up to!
Mine also dropped by about 0.6%.
An email just arrived explaining the RAR calculation changes. Apparently there was an error when calculating the RAR on Payment Protect loans. From the FAQ:
Quote:
What was the issue found with the previous calculation?
Payment Protect loans have two principal outstanding amounts:
- the investor principal amount (which is the amount that lenders invest), and
- the borrower principal amount (the amount the borrower owes the lender)
When Payment Protect was introduced, the RAR calculation should have updated to use the borrower principal amount, but continued to use the investor principal amount as it had always done. Prior to the introduction of Payment Protect, the borrower principal amount and the investor principal amount had matched. After launch, this wasn’t the case.
The knock on effect of this was that when using a lower principal balance, this resulted in some Lenders seeing a higher RAR than they should have.
Down 19 pips
So. have I got this right. Harmoney introduces an option to increase investor revenue and now produces a calculation change which shows that investor revenue streams have fallen because of it? Why should the RAR calculation have updated to use the borrower principal amount? The point of the exercise was to increase investor returns? It seems to me that some techo has noticed the disparity between the borrower and investor principal amounts, panicked, and pushed the "correct" button when no correction was needed. The correct denominator is what the investor has invested - it is the investor's RAR, not the borrower's.
I read the explanation on the Harmoney site and to be honest it is a bit hazy in my mind not least because they don't define the term principal funded. I am assuming this is the total that we invest less payment protect sales commission fees going to Harmoney (up front). It appears at first reading that the calculation effectively writes off this up front sales commission rather than matching it to the income it generates. I'd be interested how others see it, not least the tax man!
completely agree with BJ1 - if an investor places $100 in a loan, and it generates $20 interest (inclusive of PP)... then the return is 20%.
If the borrower takes PP as an additional obligation which increases his principal to $110, this doesn't diminish the return to 18.18% from the investors point of view.
Perhaps Harmoney have had a brainfade to err on the conservative side, not to fall foul of FMA with misleading representations
I could be way off track but doesn't the borrower get the same cash and owe the same amount whether or not they use PP? It's not that they borrow more to have PP but rather they commit to a higher interest rate. The borrower principal is the same either way but when we invest in a PP loan we lend a sum to the borrower (which sits as an asset) and pay Harmoney an up front sales commission (which is immediately recorded as an expense rather than an asset). Since RAR is a cash measure return is reduced with PP loans initially but will rise later as the PP premium interest is paid. Essentially a degree of conservatism is being applied.
No, the interest rate remains the same, but they owe more to Harmoney. So, if they borrow $10,000, fees of $500 and PP fees of say $1000, they owe Harmoney $11500. They just receive the $10,000. We fund $10500 plus the portion of the sale and marketing commission - from memory is 35% of PP fees - so we fund $10850.
So taking the above example, if we take 4 notes, we loan $100 but our outstanding principal is $11500/$10850 x $100 = $105.99.
Hope that clarifies.
i am not too fussed how they calculate RAR. It is just a measure. Does not affect the actual interest we get. There are merits on basing it on the outstanding principal (which includes a portion of the PP - see above post) as there will be many (not me) that use the outstanding principal for their own calculation.