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Thread: Harmoney

  1. #2121
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    Quote Originally Posted by alistar_mid View Post
    Overall housing market crash = not good, would probably have a negative effect on p2p lending
    Yeah, not good

    One thing I see a lot of people say that they include in their auto-lend (and manual selection I suspect) is 'Owned/Paying Mortgage' - thinking if the borrower can pay a Mortgage they can pay an additional loan. I started out that way, but have now come to the conclusion that a good spread into Rentals is a good choice, exactly because of this reason - if the Housing market drops, my thinking is the 'Owned/Paying Mortgage' group would likely be the higher defaulters, whilst rent would likely drop making the 'Renting' group less likely to default and hence a good diversification choice in this situation?

    At the end of the day, I guess the bigger spread you have across most/all types of criteria the more stable your return will be, not necessarily the best return though, if you have the time to ride out any major dips, leaning towards higher risk will give much higher returns.

  2. #2122
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    Quote Originally Posted by permutation View Post
    My current default number from 1000+ all time loans is (15) A-D 2/15; E+F 13/15 ouch!!
    Is that really an ouch!? If your loans are equal amounts, that default rate only represents 1.5%, E's and F's are worth much more than that in the additional Interest, yes? I guess it depends how many E+F that 13 comes from?

  3. #2123
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    Quote Originally Posted by myles View Post

    ...One thing I see a lot of people say that they include in their auto-lend (and manual selection I suspect) is 'Owned/Paying Mortgage' - thinking if the borrower can pay a Mortgage they can pay an additional loan. I started out that way, but have now come to the conclusion that a good spread into Rentals is a good choice, exactly because of this reason - if the Housing market drops, my thinking is the 'Owned/Paying Mortgage' group would likely be the higher defaulters, whilst rent would likely drop making the 'Renting' group less likely to default and hence a good diversification choice in this situation?....
    I think mortgage holders will do all they can not to default. I feel that the repayment to income ratio is important and I generally base my lending on ratios between 5-17% and a max of $25,000.

    I do choose renters as well but no "Boarders" or" Living with Parents" or "Other".

  4. #2124
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    Quote Originally Posted by permutation View Post
    I generally base my lending on ratios between 5-17%
    I'm at <20%

    Quote Originally Posted by permutation View Post
    max of $25,000.
    I don't bother with this as Harmoney set a max for each Risk Grade which I'm happy with.

    Quote Originally Posted by permutation View Post
    no "Boarders" or" Living with Parents" or "Other".
    Same, but I pick up the occasional manual loan with these if other criteria look good.

  5. #2125
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    Quote Originally Posted by permutation View Post
    I do choose renters as well but no "Boarders" or" Living with Parents" or "Other".
    I've been going back and forth with these three Residental Status options: "Boarding", "Supplied by Employer", "Living with Parents". I personally feel that "Supplied by Employer" is potentially the riskiest option since the borrower could change their job which doesn't supply accommodation and a result their living expenses will go up. "Living with Parents" could be that the borrower is trying to save money for a house deposit, lots of people do it in Auckland. "Boarding" I have no idea what it means exactly. Has anyone done any analysis on the risk of the Residental Status options?

  6. #2126
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    Quote Originally Posted by permutation View Post
    Analyzing your graph, in my experience of 1000+ loans, Your B,C,D proportions are great very similar to mine.

    But I am getting rid of all A,E,F grades over the next few months and place all the repayments into B,C,D so my spread will look B35, C40, D25. B+C=75% B+D=60% C+D=65%. Expect a RAR of about 17%.

    My current default number from 1000+ all time loans is (15) A-D 2/15; E+F 13/15 ouch!!
    interdasting

    I am only 7 months in so don't have a long enough time frame to judge, but most of my ones in arrears are E's, I think they are still under repped for how many E's I have * expected default rate

    yeah might just go to bcd like you have, although 35% + interest < 5% default rate E's always look good

  7. #2127
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    Quote Originally Posted by myles View Post
    Is that really an ouch!? If your loans are equal amounts, that default rate only represents 1.5%, E's and F's are worth much more than that in the additional Interest, yes? I guess it depends how many E+F that 13 comes from?

    I didn't mention the amounts but here they are; 95% of my loans are A_D grade with only 5% E and F. The maximum numbers of loans held in E,F grades was 10%.
    It certainly is OUCH!! I have lost 12% of my Gross Interest through E and F Defaults.

    Out of an all time total of 95 E and F grades loans, about half have been Paid-off; 13 Defaults, 6 In Arrears the rest are current and to date I have just about broken even from these grades.

  8. #2128
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    Quote Originally Posted by permutation View Post
    It certainly is OUCH!!
    Not questioning your numbers, but I'll put a quick example together that you might be able to poke holes in - a lot of assumptions I know:

    95 loans at E and F - lets say on average 25% interest annually and $100 on each loan for simplicity.

    Total investment 95 x $100 = $9500

    13 defaults - lets ignore interest gained prior to the default, which could be significant:

    13 x $100 = $1300 principal lost

    Assume average payout is only 2 years - could be significantly more or less?

    95 - 13 = 82 loans
    82 loans at @25% per year for 2 years = (82 * $100) * 25% * 2 yrs = $4100 interest

    Less lost principal from above = $4100 - $1300 = $2800 gain over 2 years

    $2800 gain over 2 years from initial investment of $9500 = $2800/$9500/2 = 14.7% return (ignoring fees and tax)

    Not an ouch? I must be missing something fundamental?

  9. #2129
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    Although if he didn't have the E&F loans his return would have increased to 21%.

    I am hovering mid 14% Rar investing in only A,B & C and have changed recently to solely Autolend.

    E&F have too high default rates plus the risk of an global economic slowdown has me running a less risky portfolio.

  10. #2130
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    Quote Originally Posted by whitt View Post
    Although if he didn't have the E&F loans his return would have increased to 21%.
    Where did that come from???

    Clearly my example was very 'worst case', since the average interest for E+F is more likely to be around 35% or more (not the 25% I used), there would be a return of probably 1/3rd of the 'lost principal' from interest gained prior to defaulting as well.

    Using likely numbers the return would be in the 23-27% range probably more, so a gain on overall rate of return not a loss...

    13 defaults from 95 over 2 years is 6.8%, which is pretty much where Harmoney say it will be? (Was this only over 2 years, I suspect it was more?)

    I get the Risk aspect of it, but based on the current Harmoney numbers you aren't loosing money being in E or F's instead of lower Risk Grades, you are making money (significant money especially if you re-invest)? BUT there is a RISK, as you say.

    What am I missing?

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