Harmoney

[alistar_mid]

look at all those sweet writeoffs!

Its really spiked the last couple of months.

Attachment 9143

[Darchie]

.....it still hurts each time.

What I monitor is the RAR and also the net write-offs as a percentage of gross interest received. My RAR is currently about 14.25% and the percentage of net write-offs to gross interest is 20.5%

Interesting comments Cool Bear ... a lot of the write-offs seem2 start hitting firmly after the 12mth mark ...
My current RAR is 12.21%

[joker]

...it still hurts each time.

What I monitor is the RAR and also the net write-offs as a percentage of gross interest received. My RAR is currently about 14.25% and the percentage of net write-offs to gross interest is 20.5%

These figures are concerning. I guess Harmoney doesn't spend too much time chasing delinquents (costly and we've already funded their $500 platform fee so it's our loss). It will be interesting to see what the effect is of the new lower interest rates and whether the default rates drop to the figures they've forecast. Lower interest rates with static default rates will cause lower a ROI but this won't be clear for a year or two yet.

[myles]

Cool Bear, Darchie, Alistar - are you willing to share the % of: number of default loans / number of total loans and the time frame ?

Clearly this should vary based on loan grade and many other factors, but it would be a useful value to compare against what Harmoney provide.

[Cool Bear]

Cool Bear, Darchie, Alistar - are you willing to share the % of: number of default loans / number of total loans and the time frame ?

Clearly this should vary based on loan grade and many other factors, but it would be a useful value to compare against what Harmoney provide.

I posted that earlier in post 2552 and 2553 but will post it here again:

Every few months or so, I analyse the results of loans up to a certain date so that the analysis is not diluted with new loans after that date.

Between June 2015 to December 2016 (18 months), I made 3726 loans. Results as at 1 July 2017.
As I cannot align the columns the last time, they are in the order:

grade
number of loans
% $current/$invested
% $principal paid/$invested
% $writeoffs/$invested
% Total

a 547 27.1% 72.9% 0.0% 100.00%
b 832 31.1% 67.6% 1.2% 100.00%
c 741 36.6% 62.1% 1.2% 100.00%
d 790 40.9% 55.8% 3.3% 100.00%
e 501 33.7% 54.2% 12.0% 100.00%
f 315 32.6% 53.1% 14.3% 100.00%

total 3726 34.3% 62.2% 3.4% 100.00%

results as at 1st July 2017 for all loans invested from Jun 2015 to 31/12/2016

note: %ages are based on actual $ value of loans not number of loans. The number of loans is just for information to give an idea of the population size

[myles]

results as at 1st July 2017 for all loans invested from Jun 2015 to 31/12/2016

note: %ages are based on actual $ value of loans not number of loans.

Thanks appreciate it - probably not much difference from dollars to numbers considering the volume of loans you've had - assuming they are all about the same size.

Since Harmoney numbers are stated as percent per annum, your numbers appear mostly a little lower than what Harmoney have suggested for the old rates:

	Actual Rate / 2	Harmoney per annum (avg for grade)
A	0.00%	0.17%
B	0.60%	0.53%
C	0.60%	0.60%
D	1.65%	2.00%
E	6.00%	4.28%
F	7.15%	10.62%

E Grade being the only significant exception.
Not taking into account how you've selected loans, which would no doubt influence the comparison, and that the period is only 2 years so not a full representation of the life of loans.

Added: Probably shouldn't have based this on 2 years as the age of loans varies from 2 years to 6 months...which would likely bring it much closer or a bit above Harmoney suggested values...still in the same ballpark either way.

[Cool Bear]

Thanks appreciate it - probably not much difference from dollars to numbers considering the volume of loans you've had - assuming they are all about the same size.

Since Harmoney numbers are stated as percent per annum, your numbers appear mostly a little lower than what Harmoney have suggested for the old rates:

	Actual Rate / 2	Harmoney per annum (avg for grade)
A	0.00%	0.17%
B	0.60%	0.53%
C	0.60%	0.60%
D	1.65%	2.00%
E	6.00%	4.28%
F	7.15%	10.62%

E Grade being the only significant exception.
Not taking into account how you've selected loans, which would no doubt influence the comparison, and that the period is only 2 years so not a full representation of the life of loans.

Added: Probably shouldn't have based this on 2 years as the age of loans varies from 2 years to 6 months...which would likely bring it much closer or a bit above Harmoney suggested values...still in the same ballpark either way.

Assuming that my loans were evenly spread over the period, then the newest loan was only about 6 months (December 2016 as at 1 July 2017) and the oldest 24 months (June 2015 as at 1 July 2017). So a simple average is 15 months old (6+24)/2. So dividing my defaults by 2 is not correct. Should be 1.25.

	Actual Rate /1.25	Harmoney per annum (avg for grade)
A	0.00%	0.17%
B	0.96%	0.53%
C	0.96%	0.60%
D	2.64%	2.00%
E	9.60%	4.28%
F	11.44%	10.62%

I had always maintain that Harmoney old default rates were too low. My calculated default/interest for the loans during that period is about 13% (based on Harmoney's figures) but the actual was closer to 20%. E grade was especially bad. And it was interesting to see that Harmoney new default rates actually increases (Scorecard 1.5)for the new E grade compared to their old ones whereas the default rates for all other grades decreases.

[myles]

Yep, I did add that to my post - you may have missed it. Still, all are 'around' the Harmoney numbers except those E's - which 'appeared' to be the better option based on supplied numbers, but not so?

Added: Having said that, based on the expected 'bulk' of defaults from either the new or old Hazard curve, using 1.25 might be a bit low? (as more defaults occur well before the 2 year point)

[Investor]

And it was interesting to see that Harmoney new default rates actually increases (Scorecard 1.5)for the new E grade compared to their old ones whereas the default rates for all other grades decreases.

True but keep in mind someone who applied prior to Scorecard 1.5 may not be given the same grade as they would on 1.5.

[BJ1]

I just wonder how many more out there have similar high write-offs but do not admit it openly...

My average loan is $671. I've had two writeoffs, the largest being $382 on a $500 loan taken as one of the first four invested back in Feb2015. I hate taking hits which is why my spread is the way it is. I'm not after top % but an average I can live with. I ignore RAR and look only to current return and my projection - which sadly is now falling with the new rates in place. Given that the opportunities for these returns are very limited, Harmoney will continue to represent a solid percentage of my portfolio - for the next couple of years it should outperform most other options, so accepting that defaults will occur is just part of the business.