Harmoney

[myles]

Under the new rates an even mix of B, C and D will probably see a drop of 3% interest...

[icyfire]

Under the new rates an even mix of B, C and D will probably see a drop of 3% interest...

Harmoney needs to reduce their already excessive Lender fees to make up for the interest drop.

[BJ1]

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

If estimated default percentages under the new tables can be relied upon then lenders should achieve more accuracy in meeting their personal return targets. There will still be defaults but a sound collection process should recover "decent" proportions of the initial write off. From what I read and have seen to date in my portfolio, recovery has been minimal, and I suggest even on low risk loans where borrowers own property. With the default experience to date, how can just six people manage the quantity of arrears to minimise lender loss?

[RMJH]

Under the new rates an even mix of B, C and D will probably see a drop of 3% interest...

Thanks, must have missed that! 3% reduction in interest but only 0.3% reduction in defaults. Really don't get that 0.6% reduction in RAR for retail investors figure. Does this mean there will be a significant shift in mix towards lower grades?

This looks like a meeting the market story not a risk re-evaluation. Growing the market is good for us, good for borrowers and bad for traditional lenders. We need providers like Harmoney to be profitable too....

[myles]

how can just six people manage the quantity of arrears to minimise lender loss?

Most of the process is likely to be automated - SMS, email, written letter. The final part uses an external Agency. If you put it into perspective - if they add 30 loans in a day and the default rate is 2% (from memory that's what they have quoted in the past as the overall default rate), that's less than one actual default per day. Paints a different picture of the workload - even though this would be an ongoing process i.e. at the end of the month there would be 30 new 31-60 defaulting loans, plus all the ones that don't eventuate into a default...doable I think?

[Investor]

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?

The only default I have had so far was from a D5 which was re-written before any repayments had been made. I believe Harmoney was/is more focused on vacuuming application fees.

[myles]

I believe Harmoney was/is more focused on vacuuming application fees.

This change certainly has the potential for a huge windfall for Harmoney if borrowers rewrite for lower interest rates. Guessing they have in excess of 10,000 active loans, at $500 a piece, $5,000,000.......

Added: Not sure I can see this happening, time will tell. Harmoney would be veerrryyyy busy processing that volume of loan rewrites? As would lenders be having to re-invest!!!

[JeremyALD]

Why would you lend out for 6.99% interest less fees? That's a terrible rate of return!

[alistar_mid]

Hit $10k interest woooooooo

Attachment 9036

Still gonna keep withdrawing to I get down to about $50k and then set up some auto lends

[Cool Bear]

While we lenders will see a drop in interest, it will also affect Harmoney with their lenders fees peg to interest. So, my take is that what they lost in that, they make up in volume. Trying to attract more borrowers and also upping what they can borrow, especially for D, E and F loans. In the short term, the borrowers fees on rewrites will give them a boost too as Myles pointed out.

And I am with RMJH that it is "meeting the market story not a risk re-evaluation".

Let us hope that their default rates are now much more accurate. And that they are not lowering their standards of accepting loans!