Harmoney

[humvee]

I have no problems with the new method of calculating the fees - it is one of the better ways of doing it. My issue is with the level they are set at - and the size fee increase this will result in for pretty much EVERYONE even those in the cheapest fee bracket. If you look at the other P2P lender in NZ that does their fees the same as the new harmoney way they charge 10% NOT 15%-20%. If at least harmoney set there fees at 10%-15% most investors would have ended up paying more then they did before but the increase would have been more modest.

With Re-writes I see why they do it the way they do - but it penalises those that took the 1st initial risk with a new borrower and potentially risked the higher default rate. The best of all worlds fair to all way of dealing with this would be to offer existing investors the 1st right of acceptance to remain invested, Eg you have say 24 hours to log into your dashboard and say yes I want to remain invested. If you don't accept that part of the loan goes out to the market too. While this is happening the increased proportion of the loan can already be out in the market being filled - so the slow down in funding the loan would be minimal

First post.

I've been investing with Harmoney since October. One of the issues I raised with them early on was their fees seemed to be out line with the risk.

Currently:

They assess the applications and grade the loans.
We invest.
Harmoney takes a fee that is a percentage of the CAPITAL.....and unrelated to the actual performance of the loan. Good or bad, they get their fee. So where is the incentive to rigorously assess risk in grading the loans? It appeared to be a moral imperative only. Only indirectly do they suffer as investors back off IF the grading of loans wasn't in line with actual risk - in aggregate. But we would not know that for years, possibly.

Under the new fee structure, Harmoney is in the risk pool right along with us. If the loans perform badly....we don't get any interest...and Harmoney doesn't get any fees. Hurrah!

As for the new fees, there is incentive to invest more and pay lower fees. I'm already well over the $10,000 threshold and should pay 17.5% instead of 20% of interest. I'm also provisionally assuming we can deduct their fee from our earnings for tax purposes. So we pay less tax on the gross interest. That's good.

Re-writes? I like them. They are a chance to get back - in full - the amount loaned to a lender long before the 36 months of 60 months elapses. Good. In my view, that improves my liquidity, if only by accident.

But re-writes are also necessary when a loan is topped up. Each top-up is - or should be - a chance to re-assess that borrower. Are they headed off the rails? Will they go into a death spiral long before the term of the loan is up? If loans were just topped up without re-writes, I'd be very worried. My money could be locked in for a ride down the plug-hole to a borrower who thinks the solution to too much debt is more debt. Re-grading them along the way would be irrelevant if I can't get my money out. No thanks. I love re-writes.

I rarely (almost never, but not quite) lend money to anyone asking for the $35,000 cap. They have nowhere left to go if they run into trouble. At least if someone runs into trouble at $30,000, they can go for a re-write....and I can get my money back and not lend them any on their new, improved $35,000 last dance.

Maybe I'm missing something....but I'm seeing people upset with what I think are some of the best features of the way Harmoney operates and the upcoming direct alignment of their rewards with the same risk we all face in lending the money.

If I've gone wrong somewhere.....please tell me. :-)

[mp52]

So Harmoney have updated their disclosure document and I took another read through as a refresher and this caught my eye:

"Harmoney and its Related Companies may be paid a commission or other financial benefit by any person in connection with any loan or the Harmoney service (eg a commission if it participates in a loan)."

From this, it seems there is a risk of Harmoney purchasing high-risk debt from another lender and "subjectively" grading it (lipstick on pig) if sufficiently incentivised? Curious what protections are there under the FMA, governance or otherwise against this?

[Darchie]

Linuxluver ...

I have been with HM since the latter part of September last year .... i have 9 write offs so far
:
4 of those were in the fraud lot so i will exclude those for this example:

So 5 left to consider
NOW..... Of those 5 .... 2 had been rewrites ....... So i think your initial view on re writes may have to mature over time!

I ask you
When looking to invest ... How do you even know if a rewrite has been an early attempt to ease their dire position? ... or
They initially borrowed a low amount ... paid a few payments on time, then go back for a much higher rewrite with no intention of repaying ...

[Darchie]

I wonder if the lack of loans is the high demand from lenders wanting to get as much in as possible before the fee hike, or Harmoney purposefully holding back loans until the fee hike.

I was rather hoping to get a little more in before Monday, but there aren't nearly enough loans to bother.

It's time consuming but over past say couple/few weeks ... loans seem to be listed up in groups and full at a blistering speed ... like some 3-5 odd minutes ... so if ya aren't loggin at that particular time ya may think listings have dried up ... i counted up 55 odd one day - i think if Harmoney revealed just how many loans they've listed each day - you'd possibly have an eyebrow raising moment ...

[Darchie]

Another crude way is checking out the loan numbers for a month ... just did this and i see they've gone from approx 63297 up to 65355 .. so roughly averaging around 68 odd loans per day yet within this time frame we had a long weekend ... so the daily listed up loans would be a little higher.

[humvee]

Another crude way is checking out the loan numbers for a month ... just did this and i see they've gone from approx 63297 up to 65355 .. so roughly averaging around 68 odd loans per day yet within this time frame we had a long weekend ... so the daily listed up loans would be a little higher.

Yes but at what point is the loan ID allocated - Based on the fact they arrive to market out of order - and the odd one can turn up out of order by several thousand - this means the ID's are allocated at an earlier stage - probably either to each application (approved or not) or at approval . So the number you get from this calculation is most likely the number of applications - or the number of approved applications - not the actual number of loans issued.

I also believe that all loans where the borrower chose insurance are being exclusively funded by the corporate lenders and are unavailable to retail currently. So this will further reduce the retail number available.

[permutation]

It's time consuming but over past say couple/few weeks ... loans seem to be listed up in groups and full at a blistering speed ... like some 3-5 odd minutes ... so if ya aren't loggin at that particular time ya may think listings have dried up ... i counted up 55 odd one day - i think if Harmoney revealed just how many loans they've listed each day - you'd possibly have an eyebrow raising moment ...

Why then is the chance of being able to invest in any Loan(s) like a lottery, depending when one logs-in?
I think if Harmoney would text investors, that wish to opt-in, when loans are placed on the market; providing a fair opportunity.

There maybe a good number of investors that are unable to log-in regularly (work) during the day to take a chance.

The only downside to my idea is a possible Log-Jam..

[Linuxluver]

Hi Darchie

Thank you for your comments. I'm up to over 100 loans and haven't had any write-offs or defaults since October '15, but then I have tended to stick to the A-C (mainly A2 to C2) loans and only occasionally dipped into what I see as murky waters at the D-F level.....just to add a flourish of higher interest to my otherwise (relatively) conservative approach. I do have one loan that falls into arrears and then they pay...and then it falls into arrears....but so far none have gone bad.

I have assumed that where a person has had a previous loan and has a payment history far less than 36 payments is almost certainly a re-write. But they could have paid another loan off early, too, so there is that possibility. Often the comments make it clear the would-be borrower is increasing their loan for some purpose.

As for people dealing in bad faith.....well....that's built into the risk profiles, I guess. They are included in the estimated default rate. They are the reason we don't lend $1000 at a time and stick to smaller amounts across many loans. I agree we can never be certain. If there are too many liars and fraudsters out there then I suppose we'll all find out the hard way. But so far, fingers crossed, I haven't seen such behaviour among my loans.

[Linuxluver]

Completely different issue: today my Harmoney fund balance shows as -$87. I assume some cheque has bounced? A big one? I had a positive balance - maybe $13 - yesterday. That looks suspiciously close to a round $100 variation.

Has anyone else seen this now or ever? I've sent them an email asking about it.

[permutation]

... I'm up to over 100 loans and haven't had any write-offs or defaults since October '15, but then I have tended to stick to the A-C (mainly A2 to C2) loans and only occasionally dipped into what I see as murky waters at the D-F level......

Welcome Linuxluver,

Good move sticking to A-C grades. I can tell you that I have just reached the 600+ loans invested, 420+ loans are in the A_C grade, have had only 1 charged off loan, a B4 grade over the last 15 months invested.

The other 180 odd loans D_F have had 4 defaults 3 E grade, 1 F grade.
I am happy with the return so far, but I'm not sure if I'm happy with the new fee structure come Monday!