Harmoney

[myles]

One thing I would love to see is for Harmoney to allow the retail lenders to have a nibble at the loans that get diverted to the wholesale market. You could still have the wholesale investors taking 75-80%, but why not let the retail lenders fill the first $5k of a $25k loan before getting 'vacuumed up' by the whales? As it stands, us little-guys don't see four out of every five loans Harmoney processes.

I'll second that. By doing this, they'll achieve the same wholesale:retail outcomes, while upping the loan volume on both markets and minimizing the rising chatter about poor loan quality in both markets. They have been concerned about this chatter, that is why they had taken the decision to invest their own money as a wholesaler. Upping the volume also makes the sub 10% platform returns more digestible because choice was increased

I might be missing what your saying, but there is a limited number of loans. The current approx. 25%/75% retail/wholesale volume split means the loans we are getting are all the loans that we will get. The only way to increase loans to retail, at that split ratio, is to increase the total number of loans, which just don't seem to be available at the moment.

Allowing the retail market to cherry-pick all loans before they go to wholesale would be unfair on the wholesale lenders, who already clearly take on the lower end of the loans. i.e. average retail RAR is around 12.2% vs average wholesale RAR around 9%.

Personally I think however Harmoney have been making the decision to split loans to retail and wholesale is okay - they appear to have been 'protecting' retailers to some degree, hence the higher average RAR of retail lenders. I'm not sure how much of this is due to historical influence (i.e. it may be changing). At around the beginning of this year the slowly growing gap between retail RAR vs wholesale RAR appears to have stopped growing and now appears to be constant or possibly even reducing. Something to watch over time. [shown in the RAR graph below]

RAR.jpg

[BJ1]

Speaking to Harmoney last week, the current split is 85% to wholesale and not expected to change. Also, wholesale have a higher fee structure than retail and seem still to be able to clean up retail loans that sit for a while. So if we are slow to fill A grade loans they will end up in the wholesale book, further reducing wholesale RAR.

[beacon]

5 charged off out of 262 repaid. Months in for them were 16, 29, 13, 13, 13. Much the same as Cool Bear's portfolio in terms of time in versus losses.

Your performance and loan picking skills are exemplary BJ1, and your chargeoff/Gross Income ratio probably the lowest in Harmoney for your loan book age (in fact for any age>1 year, I suspect). I am sure most of us will benefit immensely should you share tips/observations with a bit more detail like Myles, Cool Bear and IntheRearWithTheGear etc. choose to do.

I do wonder about Harmoney's performance in chasing bad loans - there is no reporting to investors on any audit of their processes and for all we know they could just not bother at all.

I'll second that too, and I suspect sub 10% returns are here to stay, partly as a result of that.

[BJ1]

Thanks Beacon. My first four loans were for $500 each and I lost one of those at 29 months. Initially I was keen to grow volume then I had a stern talking to myself and became more analytical. From time to time I have tweaked things but overall from then on I have used the attached templates for my investing. I work on the basis that if I weed out the obvious garbage then I already have improved my diversification so can take larger positions. Bear in mind though that I have spent a lifetime as an "anomaly analyst" assessing risk. I have been struggling to find D grade loans which meet my criteria so am well underlent in that category.

My original target return before tax was 14.50% but this got trashed by the rate reduction last year. I now aim for 14.08%, have RAR 13.75% and this month have running yield of 14.22%.

The attached loan featured last week. I asked for an explanation and was told there was a display error and that actual income was $2,486 a month. I requested that the loan be removed and represented correctly. I took a $25 position to make sure it happened. The loan was removed. So we can influence what happens but have to inconvenience ourselves to do so.

[beacon]

Thanks Beacon. My first four loans were for $500 each and I lost one of those at 29 months. Initially I was keen to grow volume then I had a stern talking to myself and became more analytical. From time to time I have tweaked things but overall from then on I have used the attached templates for my investing. I work on the basis that if I weed out the obvious garbage then I already have improved my diversification so can take larger positions. Bear in mind though that I have spent a lifetime as an "anomaly analyst" assessing risk. I have been struggling to find D grade loans which meet my criteria so am well underlent in that category.

My original target return before tax was 14.50% but this got trashed by the rate reduction last year. I now aim for 14.08%, have RAR 13.75% and this month have running yield of 14.22%.

The attached loan featured last week. I asked for an explanation and was told there was a display error and that actual income was $2,486 a month. I requested that the loan be removed and represented correctly. I took a $25 position to make sure it happened. The loan was removed. So we can influence what happens but have to inconvenience ourselves to do so.

Amazing to see you have the confidence to lend 1000 to someone unsecured, and still come out on the right side of the number line after 4 years. Hats off to you. Obviously, you prefer 36 months, but do you limit yourself to 3-25k (max loan range) loans? The D1 loan example you shared is interesting. How did you pick up on it? I had taken the info at face value and invested in it (see attached). How did Harmoney list it initially as single income, even assuming there was a typo in decimal place. I thought they checked at least the incomes of borrowers.... 2018 0910 Harmoney D1 BJ1 income anamaly loan after correction.JPG

[BJ1]

I'll happily go below $3,000 in all grades A-E and if I like an F grade loan under $3k I'll do the odd one there. I have moved more towards 36 months as we have exceeded rationality in the global marketplace and in my view get closer to the next tumble. Being at the short end means more of my exposures have room to refinance at the long end before they get into trouble.
That D loan income was just not possible. Originally there was no co-borrower income: I wonder if it exists. The monthly repayments are well over my maximum threshold, so I was never going to invest in it (apart from the $25 I risked to check on Harmoney).
There are many anomalies on the Harmoney platform and no known audit performed. The overriding problem is that despite the issues, it remains a good vehicle for those of us seeking enhanced investment returns, so we have little choice but to accept the whole shebang - if we went to the FMA for a review that could be as good as saying sayonara P2P.

[beacon]

There are many anomalies on the Harmoney platform and no known audit performed. The overriding problem is that despite the issues, it remains a good vehicle for those of us seeking enhanced investment returns, so we have little choice but to accept the whole shebang - if we went to the FMA for a review that could be as good as saying sayonara P2P.

You cracked me up with this. I am going to be watching this space with interest anyway, to see if the regulators will do anything when the Harmoney wholesale dial moves up to 85% lent in the marketplace stats...

[beacon]

I'll happily go below $3,000 in all grades A-E and if I like an F grade loan under $3k I'll do the odd one there. I have moved more towards 36 months as we have exceeded rationality in the global marketplace and in my view get closer to the next tumble.

Ok, so I haven't understood what the max loan and max loan ranges in your template mean then... I thought they meant you only bought loans which were listed for 3k-25k.

[beacon]

Speaking to Harmoney last week, the current split is 85% to wholesale and not expected to change.

So, they really are a front for the wholesalers now. What a farce
Be interesting to watch what, if anything, the regulators will do now

[Snow Leopard]

The following table may be of interest to some. It shows my default adjusted return.

Attachment 9917

Notes:

• current interest rates are used - old rates were better/different
• my selection method/criteria used - so not what someone else would get
• I don't like A5's, I love F1 and F2 - all are anomalies due to low numbers
• D's and E's are my money makers!

I believe you are calculating your losses wrong:

On the A5 $50 you have lost $43.13 of capital and also lost $1.185 of interest (I assume the IR are annual & we are working over 1 year) for a total loss of $44.315

Or if you like:
You put $500 in and get back $510.64

Your RoR is actually 2.13%