Harmoney

**myles** · 18-05-2018, 10:08 AM

Originally Posted by beacon

PP is a complicated product, designed to increase Harmoney revenue substantially (at the cost of lender returns, due to early repaid). I have observed that PP loans are also much more likely to repay early than others. Harmoney have not cared to published examples of tax treatment of PP loans and affect of early repayment on PP loans, even though those scenarios have been worked out. There must be good (for Harmoney) reasons why those examples haven't seen sunlight to date...

Personally I disagree - at an individual loan level PP isn't all that complicated.

The Lender receives a pro rata rebate on the 15% Management fee on any early termination i.e. rewrite, early payout, charge off, full waiver, of the loan. On a rewrite the 20% sales commission is also rebated pro rata, but not on any other termination - I believe this is fair as Harmoney have to manage PP (they do have to make some money too, right?).

So it is only on an early payout, charge off, full waiver of a loan where the 20% sales commission is 'lost' for the remaining portion of the loan (which will not be 100%). In a nutshell, any loan that goes past 20% of it's term should have a positive return (actually more likely 10-15% as PP payments are a positive income and additional interest is gained). This of course doesn't consider waivers.

To put this in context - for my investment of $100,000 for over 12 months, I have a total of $8.72 principal waived. The bulk of my loans exceed 10-15% of their term.

I agree PP is complicated when you look at it at a portfolio level.

**humvee** · 18-05-2018, 10:13 AM

Harmoney only have to Sunday to provide the tax certificates

"Whichever form you use, you must give this information to the recipient by:

20 May (for an end-of-year notice), or
the 20th of the following month if you are ceasing to be a payer, or
within 20 days of when a recipient requests it (in any other case)."

http://www.ird.govt.nz/rwt/deducting...tificates.html

Also does this wording mean that if we make a request for the certificate on the 10th of April that they would have to provide it by the 30th of April? instead of 20th of May?

**Cool Bear** · 18-05-2018, 10:38 AM

Originally Posted by myles

I suspect the provided figures in the 'My Dashboard' may be a bit confusing. My rough interpretation:

Protect Rebates (Lender): The amount of PP rebate paid to lender at this point in time.
Protect Rebates (Borrower): The amount of PP rebated due to early repayment - this is not a loss, this is balancing the Outstanding Principal which is inflated when the PP is taken out.
Principal waived: This is a loss due to a payment not being made.

When a PP is taken out, the lenders Outstanding Principal value is inflated above the value of the loan - this results in a higher gross interest return which, combined with the PP payment by the borrower throughout the loan, gives the benefit. I assume the PP 15%pa management fee is included in the Service / Lender fees...

It is difficult to put in words - have a look at the examples Harmoney provide which may help?

https://www.harmoney.co.nz/payment-protect/lenders

Added: The 'Premium' does not get paid at the end of the loan - PP is paid throughout the loan. However, rebates are paid at early termination of the loan.

Protect Rebates (Lender): This is the amount of PP rebate paid back to you as the investor for early settlements (repayments) of the loans - so you gain this amount.
Protect Rebates (Borrower): The is the amount of PP rebated to the borrower for early repayment and it comes from your account so it is a LOSS.
Principal waived: This is a loss due to a payment not being made. (this is correct)

For the three items above, I have lost about $2400 so far.

**Cool Bear** · 18-05-2018, 10:49 AM

Originally Posted by Cool Bear

Protect Rebates (Lender): This is the amount of PP rebate paid back to you as the investor for early settlements (repayments) of the loans - so you gain this amount.
Protect Rebates (Borrower): The is the amount of PP rebated to the borrower for early repayment and it comes from your account so it is a LOSS.
Principal waived: This is a loss due to a payment not being made. (this is correct)

For the three items above, I have lost about $2400 so far.

There are pluses:

Due to the increase in the principal outstanding from PP, I expect to reap $000s if the PP loans live out their full terms and the borrowers do not fall into hard times.

Part of the these extras are already paid to me with the normal monthly/weekly repayments by the borrowers for the PP loans (and this is reported in the tax statement)

I will also get interest on the PP portion of higher outstanding principal in the monthly/weekly repayments (this is not in the tax statement and is too tedious to calculate)

So, overall I do believe HM's prediction that PP will add about 1% to our returns compared to non PP loans. Of course, HM will get more than us for every PP loans we sign up for but then so long as it benefits us in the end, all is good.

**myles** · 18-05-2018, 11:05 AM

Just so the numbers I gave before are meaningful - approximately 25% of my loans have Payment Protect.

I think my use of 'not a loss' before is just semantics, the key was the word 'rebalancing'.

**RMJH** · 18-05-2018, 01:25 PM

Originally Posted by permutation

As I understand it, the PP running amount can be seen on the Account Summary page as follows:

(Borrower Principal amount ) - (Loan Investments funded) - (Protect Rebates Borrower) + (Protect Rebates Lender) = Current Running $Value

The "Lender Rebate" is the realized amount, crystallized due to a rewrite or early repayment.

As the loan heads towards full term, more and more of the P/P fee becomes a credit to the Lender.

Thanks. My total is $4356 which seems very high though I guess some of that will never be earned due to early repayment.