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Thread: Harmoney

  1. #3861
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    Quote Originally Posted by myles View Post
    Basically showing what Harmoney say the default is estimated to be vs what it actually is (grouped by risk grade).............
    I see it now, thanks.

    Quote Originally Posted by myles View Post
    Summary at top of report may not be completely correct - will be when I finalise the data set.
    Okay, thanks.

    So, is it safe to assume that (barring the jump over 30% due to debt sold) the default line on page 20 is the up-to-date hazard curve of our data pool?

  2. #3862
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    Quote Originally Posted by beacon View Post
    So, is it safe to assume that (barring the jump over 30% due to debt sold) the default line on page 20 is the up-to-date hazard curve of our data pool?
    Nope, it's broken. If you go back to that last time-lapse graph you'll see that when those loans were sold off it affected loans across time, not at a specific time i.e. the loans all actually defaulted at different times, but where sold off together. When they were sold off the date used to determine when they defaulted was set to when they were sold - most appeared in the 25 - 35 'ish month period (100-150 week on time-lapse). Just looking at it now, I don't think it's annualised anyway. I'll remove it to avoid confusion.

  3. #3863
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    Have updated the summary.pdf document with quite a few characteristic by grade chart sets where they make sense. Some of these appear to offer some hints of how the Harmoney grading process may be working.

    At this stage I'll take a break from making new charts unless someone asks for something specific or I think of something useful - if I've missed anything, let me know.

    I'll put up the final summary document and unique.csv and raw.csv sometime late tonight. If you find any errors or have problems with these let me know.

    Time to digest some of this info

  4. #3864
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    Quote Originally Posted by myles View Post
    Have updated the summary.pdf document with quite a few characteristic by grade chart sets where they make sense. Some of these appear to offer some hints of how the Harmoney grading process may be working.

    At this stage I'll take a break from making new charts unless someone asks for something specific or I think of something useful - if I've missed anything, let me know.

    I'll put up the final summary document and unique.csv and raw.csv sometime late tonight. If you find any errors or have problems with these let me know.

    Time to digest some of this info
    fantastic work myles. Lots of info to make sense of. Reinforces that previous default is something to avoid and to consider scaling down pp loans. Owning home seems to perform better then renting, and suprisingly 20-29 age group performs comparatively well.

    The only other thing that could be done (but really getting quite pedantic), is determine the average age of loan in each category to ensure comparing apples with apples. But its probably safe to assume simplistically the loan age mix would be similar.

    How are you calculating HM estimated default rate per group in the bubble graph? In "Half yearly paid off loans", does "paid off" exclude part paid?

    Thanks again!

  5. #3865
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    Quote Originally Posted by leesal View Post
    How are you calculating HM estimated default rate per group in the bubble graph? In "Half yearly paid off loans", does "paid off" exclude part paid?
    Attempted explanation a few posts back - calculated by grouping loans with same estimated default values (i.e risk grade) - it is not time based. Different Scorecard risk grades had different estimated default values so make up different circles.

    In case it's not clear, each loan has the Estimated Default Rate recorded with it - so calculation is similar to all other bar charts, but annualised as per Harmoney's estimated rate.
    Last edited by myles; 14-10-2018 at 11:14 AM. Reason: Clarity

  6. #3866
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    Excellent document myles. Just a query about co-borrowers defaults. The chart on p6 shows loans with a co-borrower default at half the rate of single borrower loans yet on p25 co-borrower defaults seem to be almost always at a higher rate than single borrower loans. It maybe the way I'm reading it but I would appreciate your view on this. Cheers and thanks for what is obviously a huge amount of time consuming work on your part.

  7. #3867
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    Default co borrowers

    Quote Originally Posted by joker View Post
    Excellent document myles. Just a query about co-borrowers defaults. The chart on p6 shows loans with a co-borrower default at half the rate of single borrower loans yet on p25 co-borrower defaults seem to be almost always at a higher rate than single borrower loans. It maybe the way I'm reading it but I would appreciate your view on this. Cheers and thanks for what is obviously a huge amount of time consuming work on your part.
    Myles, I will try to answer this.

    Good spotting Joker.

    The difference is in the scale of things.

    In page 25, for grades where the co-borrower's defaults are higher, the numbers (as in population) are not significant - for example F, only 2 defaults in co-borrowers out of 8 gives it a 25% default rates. OR the absolute difference in percentages is not significant as in A where the single is 0.44% (14/3111) and coborrowers 0.97% (5/517) - an absolute difference of just 0.52%. Both Population size and Absolute percentage difference are important when you combine the grades.

    Whereas, where the singles are higher eg E, both the numbers and absolute percentage difference is significant. So E has single 291/2336 = 12.46% and coborrowers 7/72 = 9.72%, a difference of 2.74%.

    As an example, if you add E and F, the numbers are single (291+250)/(2336+1203)=15.29% and coborrowers (7+2)/(72+8) =11.26%. So, singles are still way higher than coborrowers. But looking at the two chart (without noticing the numbers) one would have thought that they even out.

    An analogy would be if you add a pot of boiling water to a pot of cold water, the temperature of the cold water would rise considerably. But if you add a spoonful of boiling water to a pot of cold water, it does not make much difference to the cold water. Or if you add a pot of slightly warmer water to the pot of cold water, there is not much difference to the cold water either.
    Last edited by Cool Bear; 14-10-2018 at 02:00 PM. Reason: expand analogy

  8. #3868
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    Would anyone that knows a bit more about tax than myself care to provide some advice / peer-review my work?

    I've put together a Double Entry cashbook in Excel for my Harmoney Investing, and I'd like a second pair of eyes to check my work. I've never done any form of accounting before, so this was all pretty new to me...

    All of my Harmoney investing has been carried out through a NZ Registered Company. I intend to claim back the Harmoney Fees, as the company is "in the business of lending"

    This is how I've coded the different kinds of transactions that I've carried out- Does this look right? I wasn't really too sure about the Payment Protect unfunded...

    Double Entry.jpg
    Last edited by alundracloud; 14-10-2018 at 02:05 PM. Reason: changed attached screenshot

  9. #3869
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    Quote Originally Posted by joker View Post
    The chart on p6 shows loans with a co-borrower default at half the rate of single borrower loans yet on p25 co-borrower defaults seem to be almost always at a higher rate than single borrower loans. It maybe the way I'm reading it but I would appreciate your view on this.
    If you add up all the individual numbers (population and defaults) you see that they all add up, so no smoke and mirrors

    You need to consider the weighting/proportion of each grade bar to the whole - for example the E grade 'No' bar (appears a little higher) represents 2458 loans at ~12% default rate (305 defaults), compared to say the A Grade 'No' bar (appears much lower) that represents 3158 loans loans at ~0.4% default rate (14 defaults). The E swamps the A on defaults so at the overall level drives up the number of 'No' defaults.

    The left and right bars don't represent the same base number of loans, it is the ratio to the base number of loans.

    Harder to explain than it should be...?
    Last edited by myles; 14-10-2018 at 02:11 PM.

  10. #3870
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    Quote Originally Posted by myles View Post
    If you add up all the individual numbers (population and defaults) you see that they all add up, so no smoke and mirrors

    You need to consider the weighting/proportion of each grade bar to the whole - for example the E grade 'No' bar (appears a little higher) represents 2458 loans at ~12% default rate (305 defaults), compared to say the A Grade 'No' bar (appears much lower) that represents 3158 loans loans at ~0.4% default rate (14 defaults). The E swamps the A on defaults so at the overall level drives up the number of 'No' defaults.

    The left and right bars don't represent the same base number of loans, it is the ratio to the base number of loans.

    Harder to explain than it should be...?
    Yep hard to explain - All to do with Mix. Coolbears teaspoon of boiling water was a good analogy.

    Co-Borrower is a good example of adverse selection. Two average borrowers (D+D grade) given a B grade loan, does not equal one good borrower (B grade)

  11. #3871
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    Quote Originally Posted by myles View Post
    Attempted explanation a few posts back - calculated by grouping loans with same estimated default values (i.e risk grade) - it is not time based. Different Scorecard risk grades had different estimated default values so make up different circles.

    In case it's not clear, each loan has the Estimated Default Rate recorded with it - so calculation is similar to all other bar charts, but annualised as per Harmoney's estimated rate.
    Gotcha, and on the other side - the actual default would be the total # of defaults / cumulative # of days of all the loans.

    How do you add up paid off / charge offs? Is it taken to current date, or date of repayment/default?

  12. #3872
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    Have a read of the Harmoney and Lending Club definitions - I linked to them above.

    No cumulative # of days, just number of days / 365.25.

    Defaults are all 'Charge Off' + 'Debt Sold' vs everything except 'Cancelled' loans.

    The final date was the query I was asking about before - Harmoney don't appear to do the same as Lending Club. Lending Club takes it back an arbitrary 120 days, Harmoney take from first to last (that's my interpretation of what their wording). So first loan start date to last loan payment date is what I'm using (I actually had max(start date) - min(start date), but have 'fixed' that to max(last payment date) - min(start date) and it has shifted the scatter pretty much under the line in lower risk grades - high risk grades are off the line (i.e. lower default rate on high risk grades then estimated).

    It seems a pretty rudimentary way of calculating it, but it appears to be the way it is done...

  13. #3873
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    Putting this up a bit early. It includes the two updated csv files that were put up today. The data set summary on page 4 should be correct for the unique.csv file which is what all of the charts are based on.

    I've dropped off the last chart as it seemed to be causing some confusion, will revisit it at a later time.

    Please note the warning in the summary about comparing values to annualised values.

    I can claim the largest loan There is a story behind it - it wasn't meant to be - moral of the story - don't get distracted when purchasing loans. I've given up sweating over it, if it defaults it will hurt a bit, but not too much now

    summary.pdf

    unique.csv

    raw.csv

    I've deliberately not compressed the csv files (they aren't overly big), just to avoid problems. These are big enough that they may cause some spreadsheet software to 'chug' so be prepared for that.

    If you find any errors in the data or corrections to the numbers in the summary, please let me know and I'll correct them when I can.

    If there are charts that you think would be useful to everyone and would like me to try to generate, I'm happy to do that within reason.

    If you find the secret to selecting the perfect loans, please share.

    If you see a loan for a Caravan, you might be onto a good thing

    Enjoy!

  14. #3874
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    As its currently proposed harmoney could end end up caught up in this too

    https://www.interest.co.nz/personal-...erson-test-and

    I cannot find a definition of who they define as "high-cost lenders"

    However if we just look at interest and fees alone in the combined data set there 11 Unique loans where interest paid to date is greater then amount invested - Key point to rember is is only what has been paid todate - the real number will be alot higher once loans reach full term. Also as
    proposed the 100% cap includes all fees as well as default charges



    "
    Interest and fees on high-cost loans will be limited to 100% of the amount borrowed (the loan principal). Thus if an individual borrows $500, they will never have to pay the lender back more than $1000, including all fees and interest, the Government says. This will only apply to "high-cost lenders" with the aim being to prevent unmanageable debt and financial hardship from accumulating large debts from a small loan.The idea is that even if the borrower defaults, they would repay no more than twice the original loan principal, including interest, default interest, and all fees. "


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    heard on the radio (but havnt seen in writing) that high cost was defined as interest rates greater than 50% per annum.

    Highest at harmoney was 39%, dont know if that is the case now..
    Last edited by IntheRearWithTheGear; 15-10-2018 at 10:05 AM.

  16. #3876
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    Quote Originally Posted by myles View Post
    Putting this up a bit early. It includes the two updated csv files that were put up today. The data set summary on page 4 should be correct for the unique.csv file which is what all of the charts are based on.

    I've dropped off the last chart as it seemed to be causing some confusion, will revisit it at a later time.

    Please note the warning in the summary about comparing values to annualised values.

    I can claim the largest loan There is a story behind it - it wasn't meant to be - moral of the story - don't get distracted when purchasing loans. I've given up sweating over it, if it defaults it will hurt a bit, but not too much now

    summary.pdf

    unique.csv

    raw.csv


    Enjoy!
    Fantastic effort Myles. Lots of top notch analysis which will help shed valuable insights, to help optimise our loan selections, even should the economy does head towards more turbulent times.

    Am comparatively an excel hack compared to your DB charting skills, but heres a lone graph that some may find useful.

    It tracks lifecycle stats by month of initiation. Stats are all as a % of initial capital invested. eg int% = total interest earned to date for mmmyy loan/ total investment made in mmmyy

    Also the "arrears" figure I've taken is my own calculation of "principal at risk" (being the entire principal outstanding of loans more then half a payment in arrears). In addition I don't rely on HM judgement on arrears. Happy to share how I calculate if requested.

    Second graph shows remaining principal in $ value. Use this as a measure of future potential (eg potential for further interest / further defaults). Months with less then 10% principal outstanding should have minimal change to Int/Charge off.

    Thirdly is a measure of clear interest %. Being Interest earned less principal in arrears less defaults (no HM fee). Note it is not annualised, but over the period of the investment (which given the high early repayment would probably work out as annual anyway!).

    Capture.JPG

  17. #3877
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    Once again, many thanks Myles for your time and effort and producing a fantastic top-notch and very professional report.

  18. #3878
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    Quote Originally Posted by leesal View Post
    Fantastic effort Myles. Lots of top notch analysis which will help shed valuable insights, to help optimise our loan selections, even should the economy does head towards more turbulent times.

    Am comparatively an excel hack compared to your DB charting skills, but heres a lone graph that some may find useful.

    It tracks lifecycle stats by month of initiation. Stats are all as a % of initial capital invested. eg int% = total interest earned to date for mmmyy loan/ total investment made in mmmyy

    Also the "arrears" figure I've taken is my own calculation of "principal at risk" (being the entire principal outstanding of loans more then half a payment in arrears). In addition I don't rely on HM judgement on arrears. Happy to share how I calculate if requested.

    Second graph shows remaining principal in $ value. Use this as a measure of future potential (eg potential for further interest / further defaults). Months with less then 10% principal outstanding should have minimal change to Int/Charge off.

    Thirdly is a measure of clear interest %. Being Interest earned less principal in arrears less defaults (no HM fee). Note it is not annualised, but over the period of the investment (which given the high early repayment would probably work out as annual anyway!).

    Capture.JPG
    Thanks for sharing Leesal. Interesting charts

  19. #3879
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    Default Thanks Again Myles

    Quote Originally Posted by myles View Post
    If you find the secret to selecting the perfect loans, please share.

    If you see a loan for a Caravan, you might be onto a good thing

    Enjoy!
    Watch out for owners doing home improvements

  20. #3880
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    E4 with partial pp, just up.

    Previously would have mulled this over, and on a day with few loans would have taken it. Thanks to Myles's data will leave this one

    Capture.JPG

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