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Thread: Harmoney

  1. #1981
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    Quote Originally Posted by alistar_mid View Post
    yep, I have done extensive financial modelling on harmoney and this the same conclusion i came to - although working this out is pretty easy
    Have a look at the individual default estimates per risk grade sub-category. F1 offers the highest return @ 32.26% and after that the returns decline; I guess because Harmoney has limited itself to charging under 40% and thus the loan rates are squeezed in F Grade to the extent that F2-F5 don't generate the net return warranted by the risk. They'd have to charge 50% to cover the estimated F5 default risk. That suggests that retail investors seeking to maximise return should leave F2-F5 to the wholesale players.

  2. #1982
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    Quote Originally Posted by reacher View Post
    Do you think you can decrease the average loss of an F loan using some of the filters in Auto Lend? Thereby improving the average total return?

    The main filter I like to look at is loan repayment to income as I feel this is a key factor in successful loan repayment. What are other peoples thoughts? I am sure Harmoney has data on reducing the risk of all graded loans based on different filters.
    I have posted my thoughts regarding RvI ratios on this forum even before Harmoney added that filter to Auto-Lend.

    Have taken over 1000 loans over 2 years now, have 10 E, F grades from 12 total defaults . Have found even with low repayment ratios, there must be other factors that have caused these defaults, one of them possibly very low incomes with some people just unable to make ends meet?


    Permutation RvIR Defaults.JPG
    Last edited by permutation; 05-03-2017 at 10:14 AM.

  3. #1983
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    Quote Originally Posted by BJ1 View Post
    Have a look at the individual default estimates per risk grade sub-category. F1 offers the highest return @ 32.26% and after that the returns decline; I guess because Harmoney has limited itself to charging under 40% and thus the loan rates are squeezed in F Grade to the extent that F2-F5 don't generate the net return warranted by the risk. They'd have to charge 50% to cover the estimated F5 default risk. That suggests that retail investors seeking to maximise return should leave F2-F5 to the wholesale players.
    I agree. There is also a possibility that, in an environment where loans cant be generated fast enough, Harmoney could become more lax on their grading. i.e. accept more unacceptable loan applications into the last F grade and just push everything up the grading system slightly to avoid screwing with their "effective" rating system and risk allocation model while still maintaining loan volumes. I stay away from F grades for now. Thoughts?

  4. #1984
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    Quote Originally Posted by permutation View Post
    I have posted my thoughts regarding RvI ratios on this forum even before Harmoney added that filter to Auto-Lend.

    Have taken over 1000 loans over 2 years now, have 10 E, F grades from 12 total defaults . Have found even with low repayment ratios, there must be other factors that have caused these defaults, one of them possibly very low incomes with some people just unable to make ends meet?


    Permutation RvIR Defaults.JPG
    Its quite difficult to make any correlation with the amount of information we're given on these people. I initially thought (as well as many others) that there was a correlation between # of enquiries vs defaults but I haven't seen it in my sample of loans, albeit, my sample is quite small as I've only been with Harmoney for 8 months. Any oldies able to give us some insight with a higher sample size? I know there's an analysis on one of the US P2P players that was called out in this forum.

  5. #1985
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    Quote Originally Posted by XxOrooxX View Post
    I agree. There is also a possibility that, in an environment where loans cant be generated fast enough, Harmoney could become more lax on their grading. i.e. accept more unacceptable loan applications into the last F grade and just push everything up the grading system slightly to avoid screwing with their "effective" rating system and risk allocation model while still maintaining loan volumes. I stay away from F grades for now. Thoughts?
    With the small number of loans in the market place these days, Harmoney have every incentive to adjust their models to allow more borrowers in.
    When the numbers are reduced enough to seriously threaten their business model they most certainly will.
    After all, its not their money at risk. And short term survival overrides long term reputation considerations.
    Last edited by Finite; 06-03-2017 at 01:55 PM.

  6. #1986
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    Quote Originally Posted by Finite View Post
    With the small number of loans in the market place these days, Harmoney have every incentive to adjust their models to allow more borrowers in.
    When the numbers are reduced enough to seriously threaten their business model they most certainly will.
    After all, its not their money at risk. And short term survival overrides long term reputation considerations.
    I don't expect such behaviour to occur. Harmoney has chosen to ramp up "production" in a much larger market (Australia) and if that takes off at a rate comparable to NZ the need for volume should be satisfied. So, for investors relishing a strong return on funds and two years experience under their belt with which to judge the risk in the risk grades, we should all keep our fingers crossed that Harmoney's Australian ventures prove successful.

  7. #1987
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    Quote Originally Posted by BJ1 View Post
    Have a look at the individual default estimates per risk grade sub-category. F1 offers the highest return @ 32.26% and after that the returns decline; I guess because Harmoney has limited itself to charging under 40% and thus the loan rates are squeezed in F Grade to the extent that F2-F5 don't generate the net return warranted by the risk. They'd have to charge 50% to cover the estimated F5 default risk. That suggests that retail investors seeking to maximise return should leave F2-F5 to the wholesale players.
    Oh right, haven't quite looked at it at that level but i think I stick in the average time to default for each loan. But yeah, that sounds about right

  8. #1988
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    Quote Originally Posted by permutation View Post
    Have found even with low repayment ratios, there must be other factors that have caused these defaults, one of them possibly very low incomes with some people just unable to make ends meet?
    Permutation RvIR Defaults.JPG
    While a low repayment ratio may indicate that a loan may be easier to service the borrower may have other debt. As such when a borrower takes an additional loan with a low repayment ratio it may in effect be a high repayment ratio when considered along with all their other debt payments. Ie the borrower may be using 30% of their income to service debt and an additional loan through harmoney which only requires 5% of their income to service in effect takes them to 35%. But as lenders we don't know this.

  9. #1989
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    I've $0.21 recovered out of about $340 charged off. How are others tracking in this space?

    I recall Harmoney previously forecasting recovery of $0.10 in the dollar. But cannot find this anymore.

    I see Harmoney has been re recruiting in this space too http://m.seek.co.nz/job/32608818

  10. #1990
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    Quote Originally Posted by Wsp View Post
    While a low repayment ratio may indicate that a loan may be easier to service the borrower may have other debt. As such when a borrower takes an additional loan with a low repayment ratio it may in effect be a high repayment ratio when considered along with all their other debt payments. Ie the borrower may be using 30% of their income to service debt and an additional loan through harmoney which only requires 5% of their income to service in effect takes them to 35%. But as lenders we don't know this.
    True but we should hope that Harmoney picks up on the fact that their capacity to service the new loan comes up on their credit worthiness review and allocates them to a risk category to suit (if the lender takes out an additional loan with a bit of time that passes before applying for a new loan).

    Applying for multiple loans at the same time has presented a challenge for US P2P platforms. I'm sure most of you have heard about the differences between a soft and hard check and how people took advantage of the time it takes to do a hard check (or even the negligence on the P2P provider to do it) to take out multiple loans at the same time. Not sure if it applies here but if it does, it will provide a challenge for us to identify these guys.

    One way I'm thinking is checking the # of enquiries they've had. This doesn't mean that every person with a high # of enquiries is trying to apply for more loans they can repay but people that try this will need to make multiple enquiries so it might be a good indicator imo.

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