Quote Originally Posted by beacon View Post
PP is a complicated product, designed to increase Harmoney revenue substantially (at the cost of lender returns, due to early repaid). I have observed that PP loans are also much more likely to repay early than others. Harmoney have not cared to published examples of tax treatment of PP loans and affect of early repayment on PP loans, even though those scenarios have been worked out. There must be good (for Harmoney) reasons why those examples haven't seen sunlight to date...
Personally I disagree - at an individual loan level PP isn't all that complicated.

The Lender receives a pro rata rebate on the 15% Management fee on any early termination i.e. rewrite, early payout, charge off, full waiver, of the loan. On a rewrite the 20% sales commission is also rebated pro rata, but not on any other termination - I believe this is fair as Harmoney have to manage PP (they do have to make some money too, right?).

So it is only on an early payout, charge off, full waiver of a loan where the 20% sales commission is 'lost' for the remaining portion of the loan (which will not be 100%). In a nutshell, any loan that goes past 20% of it's term should have a positive return (actually more likely 10-15% as PP payments are a positive income and additional interest is gained). This of course doesn't consider waivers.

To put this in context - for my investment of $100,000 for over 12 months, I have a total of $8.72 principal waived. The bulk of my loans exceed 10-15% of their term.

I agree PP is complicated when you look at it at a portfolio level.