Harmoney

[myles]

Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.

However, the F end is significantly different and lenders will be taking significantly more risk for a similar return! Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).

Added: This could be a reflection of not having the old default rate for the F end right and this change is the real story with little change in the real current risk?

Example: An old D5 with a 'suggested' current default rate of 2.5% (interest ~30%) really has a default rate of 9.5% (a new F5 with interest ~30%).

[Cool Bear]

Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.

However, the F end is significantly different and lenders will be taking significantly more risk for a similar return! Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).

Added: This could be a reflection of not having the old default rate for the F end right and this change is the real story with little change in the real current risk?

Yes, I notice too when I compared the defaults and interest rates earlier that while the interest rates drops a lot for D5 to E4, the default rates actually goes up! not down. I supposed the old defaults rates for those grades were too low as my experience shows.

[Wsp]

According to this Harmoney job advert they have 5 collections officers and are looking to employ a sixth. https://www.seek.co.nz/job/34000229

[BJ1]

According to this Harmoney job advert they have 5 collections officers and are looking to employ a sixth. https://www.seek.co.nz/job/34000229

If estimated default percentages under the new tables can be relied upon then lenders should achieve more accuracy in meeting their personal return targets. There will still be defaults but a sound collection process should recover "decent" proportions of the initial write off. From what I read and have seen to date in my portfolio, recovery has been minimal, and I suggest even on low risk loans where borrowers own property. With the default experience to date, how can just six people manage the quantity of arrears to minimise lender loss?

[myles]

how can just six people manage the quantity of arrears to minimise lender loss?

Most of the process is likely to be automated - SMS, email, written letter. The final part uses an external Agency. If you put it into perspective - if they add 30 loans in a day and the default rate is 2% (from memory that's what they have quoted in the past as the overall default rate), that's less than one actual default per day. Paints a different picture of the workload - even though this would be an ongoing process i.e. at the end of the month there would be 30 new 31-60 defaulting loans, plus all the ones that don't eventuate into a default...doable I think?

[kiwi_on_OE]

Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.

... Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).

I look at it as you do in your E3 example, ie. what's the change in interest rate for a given default rate. For default rates from 0.16% to 1.14% the interest rate is higher now.

Does anyone know the formula to calculate the effective interest rate given the actual interest rate and the default rate? It would be interesting to see what that says about the old and new rates.