Harmoney

[RMJH]

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!

[leesal]

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

[RMJH]

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.

[Cool Bear]

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.

[Cool Bear]

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 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.

[BJ1]

I'm with you Cool Bear on not caring how they calculate RAR as my decisions totally disregard it, but I do question if they know what they are doing - and to date have concluded that many there don't.

[Saamee]

I'm with you Cool Bear on not caring how they calculate RAR as my decisions totally disregard it, but I do question if they know what they are doing - and to date have concluded that many there don't.

Ha ha YES indeed. I worked that out a while ago myself

[Cool Bear]

I'm with you Cool Bear on not caring how they calculate RAR as my decisions totally disregard it, but I do question if they know what they are doing - and to date have concluded that many there don't.

I agree too with your conclusion although I am still happy overall and had been adding to my investment due to being a touch careful of the toppish sharemarket.

[JeremyALD]

Saw a borrower wanted 25k at about 20% interest the other day and in his comments were "to use the funds to invest into the share market". Like are you kidding me?! Pretty sure it would of triggered my autolend too as he had been in his job for a couple of years. Makes me rethink autolend with one's like that!!

[Investor]

Debt Sold Loans

So once we go back into reports and find a loan with the status 'Debt Sold', is the Last payment amount what we view to see how much was recovered? It looks like mine had 2/5 recovered at sale which isn't too bad. Also, is this just reported as a principal repayment? It looks like my principal written off amount did not change.