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27-07-2017, 08:27 PM
#2461
yeah, nah
|
Pre August 2017 |
Post August 2017 |
Grade |
Default Rate |
Interest Rate |
Default Rate |
Interest Rate |
A1 |
0.08% |
9.99% |
0.05% |
6.99% |
A2 |
0.13% |
11.46% |
0.10% |
7.99% |
A3 |
0.16% |
12.03% |
0.11% |
8.99% |
A4 |
0.21% |
12.63% |
0.12% |
9.99% |
A5 |
0.27% |
13.25% |
0.14% |
10.99% |
B1 |
0.32% |
13.84% |
0.16% |
12.49% |
B2 |
0.42% |
14.49% |
0.18% |
13.49% |
B3 |
0.54% |
15.16% |
0.21% |
14.49% |
B4 |
0.63% |
15.80% |
0.25% |
14.99% |
B5 |
0.74% |
16.48% |
0.30% |
15.49% |
C1 |
0.86% |
18.52% |
0.37% |
16.49% |
C2 |
1.04% |
19.67% |
0.46% |
17.49% |
C3 |
1.19% |
20.82% |
0.56% |
17.99% |
C4 |
1.39% |
22.06% |
0.71% |
18.99% |
C5 |
1.51% |
23.23% |
0.89% |
19.49% |
D1 |
1.53% |
24.41% |
1.14% |
20.49% |
D2 |
1.79% |
25.80% |
1.44% |
21.49% |
D3 |
1.95% |
27.12% |
1.80% |
21.99% |
D4 |
2.21% |
28.70% |
2.19% |
22.49% |
D5 |
2.50% |
30.24% |
2.63% |
22.99% |
E1 |
2.78% |
31.81% |
3.15% |
23.99% |
E2 |
3.52% |
33.95% |
3.73% |
24.92% |
E3 |
4.11% |
35.33% |
4.41% |
25.60% |
E4 |
4.95% |
36.64% |
5.13% |
26.27% |
E5 |
6.05% |
38.25% |
5.87% |
26.95% |
F1 |
6.96% |
39.22% |
6.62% |
27.63% |
F2 |
8.36% |
39.36% |
7.38% |
28.31% |
F3 |
9.79% |
39.61% |
8.09% |
28.98% |
F4 |
12.63% |
39.98% |
8.79% |
29.66% |
F5 |
15.38% |
39.99% |
9.50% |
29.99% |
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27-07-2017, 08:36 PM
#2462
yeah, nah
Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.
However, the F end is significantly different and lenders will be taking significantly more risk for a similar return! Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).
Added: This could be a reflection of not having the old default rate for the F end right and this change is the real story with little change in the real current risk?
Example: An old D5 with a 'suggested' current default rate of 2.5% (interest ~30%) really has a default rate of 9.5% (a new F5 with interest ~30%).
Last edited by myles; 27-07-2017 at 08:45 PM.
Reason: Added:
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27-07-2017, 08:41 PM
#2463
Member
Originally Posted by RMJH
Happy to meet the market but the supporting material is a bit puzzling to me on first read. I don't see how reduced risk of default could account for a reduction from 9.99% to 6.99%. What I would like to see is a table of old and new rates side by side. Goodness knows why that wasn't included in the email. Smacks of PR not openess. Personally I would rather be given the economic realities not spin. Stated 0.6% reduction in RAR doesn't feel right.
I reckon my RAR will be affected by about 2% or more equating to many thousands of $ a year in net interest for me.
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27-07-2017, 08:45 PM
#2464
Member
Originally Posted by myles
Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.
However, the F end is significantly different and lenders will be taking significantly more risk for a similar return! Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).
Added: This could be a reflection of not having the old default rate for the F end right and this change is the real story with little change in the real current risk?
Yes, I notice too when I compared the defaults and interest rates earlier that while the interest rates drops a lot for D5 to E4, the default rates actually goes up! not down. I supposed the old defaults rates for those grades were too low as my experience shows.
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27-07-2017, 08:50 PM
#2465
Member
According to this Harmoney job advert they have 5 collections officers and are looking to employ a sixth. https://www.seek.co.nz/job/34000229
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27-07-2017, 08:54 PM
#2466
Member
Past experience and all data now useless!!
What bugs me about this is that I have been trying to build up a great database (6000) loans and had done many analysis - eg analyse all loans for the year 2006 (2260 loans) by grades (A1 to F5) for defaults, interest received, %age repaid, etc etc. The objective was to determine, as time goes by, which grades are the best to invest in without diluting the results with new loans.
With this change, all those data and knowledge are rather useless. As Harmoney states " This means that a borrower that was a C3 on the old scorecard is unlikely to be a C3 on the new scorecard"
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27-07-2017, 09:16 PM
#2467
Member
overall I'm pleased that Harmoney is looking to improve their credit model. However I suspect rewrites may spike for those who can now access lower interest rates
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27-07-2017, 10:00 PM
#2468
yeah, nah
Originally Posted by Wsp
overall I'm pleased that Harmoney is looking to improve their credit model. However I suspect rewrites may spike for those who can now access lower interest rates
Could be an opportunity to get out of some of those more risky loans - before they default - glass half full view...but I suspect the more risky loan borrowers will have nowhere to re-negotiate a loan to?
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27-07-2017, 10:10 PM
#2469
Member
Originally Posted by myles
Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.
... Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).
I look at it as you do in your E3 example, ie. what's the change in interest rate for a given default rate. For default rates from 0.16% to 1.14% the interest rate is higher now.
Does anyone know the formula to calculate the effective interest rate given the actual interest rate and the default rate? It would be interesting to see what that says about the old and new rates.
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27-07-2017, 10:21 PM
#2470
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