Haha - I love your humour:)
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Just doing some monthly numbers so thought I'd put up some data as it's always good to compare against others.
This represents around 18 months of investing $100K, no withdraws, 2,229 total loans.
The charge off value may look high to some, however it only represents 1.6% defaults (on loan count, almost the same in value). My return calculation, after tax (10.5% + deductions) is 15.52% based on current value.
I think I may now be over the 'default' hump (i.e. in year two defaults begin to reduce) as I'm seeing my RAR creep upwards ever so slowly. Time will tell - hopefully in another 6 months those older loans will start to outweigh the new defaults (note ~80% of my loans are 5 year loans).
Attachment 9892
Attachment 9893
I have another loan set running at 14.84% RAR with more C's, less D's and less E's, so having the balance pretty much in the middle, seems to be working for me. I'd like to pick up some more D's and E's, but they just aren't available.
I'll second that. Well done Myles. I'm struggling to keep to the high 13% too, with current portfolio numbers roughly half of Cool Bear's. Also, struggling to invest much despite a steady (albeit low quantity and quality) trickle of loans ... Squirrel returns have weakened considerably and LC hasn't much volume that stays available long enough to bite into. So plodding along with Harmoney, but looking for alternatives ...
Excellent results Myles. I've attached my charts and have unfortunately not performed as well as you. I've been in only 1 year, so missed out on scorecard 1's higher rates (up to 39.99%). I had intended to invest $100k but after the recent changes and lack of loans have gone backwards despite doubling investment to $50 per loan. After several defaults on the riskier grades combined with very few decent C, Ds available, I moved more into A & B loans. I was around 13.3% but fell after an early D2 $100 investment was charged-off. Peak was around 2161 active loans but now at 1934. Autolend isn't getting any loans and checking what's on offer regularly is too time consuming. Interestingly, my $$$ charged-off is 8% of gross interest compared to your 11% confirming that a conservative loanbook results in lower returns. I've stopped investing atm.
Attachment 9894
Attachment 9895
I'm typically investing $100 in each loan now, with regular $200 and even $400 on some of what I consider the 'safer/better' loans. With 100K it's the only way to keep funds available down, and because of the overall size, I don't see it as being particularly risky.
Have you look at Zagga (previously Lendme). Not much on offer but you can invest in chunks of $1000 when available. I have been in for about 2+ years. Only less than 10 loans so far and already 2 paid back as loans are between usually 6 months and 2 years. They could do with more investors. Per $10,000 invested, I would spend a very small fraction of the time I spend on Harmoney. Another advantage is also that you do not have any cash sitting with them (unlike Harmoney and Lending Crowd). You only put in cash when and if the loan is taken up and they will give about a week's notice to do so.
I had looked at them last year, but only E and F grades had seemed tempting. Attachment 9896
Since then they've had a C default, making their overall default rate across all risk grades and loans issued thus far to be 1.77% on a very flea base (https://www.zagga.co.nz/invest/rates-of-default ) vs 3.37% to date with Harmoney on comparatively an elephantine base, which is returning 10% RAR.
To August 2018, they had only lent approx $8 million in New Zealand and $61 million in Australia. ( https://www.interest.co.nz/personal-...vestors-are-nz). Have you taken any/all offered loans A1-F5, or just the more risky ones? If you have taken any Aussie loans too, are there any tax implications of Aussie interest earned?
The rates in your table are indicative only and are hardly adhered to at all. For example, in the table you have C4 at 7.54%. I have a C4 loan returning 14.39% net of fees (see attached). That is my highest return, the other loans are returning mostly between 6.79% and 10% (net of fees).
I do not pay much attention to the grades but more to the LVR and their credit ratings and l also scan through all the documents attached. I do look at all loans briefly and if I like one, then more closely at the documents. I commit $5k or more in each. Because they do not have that much investors yet, some of the loans ended up not filled and lapse. But it seems to be improving (more investors must be coming on board).
Not sure about the default you mentioned. One of mine did missed a monthly payment and had some trouble but in the end we got our money back with default interest as well as the LVR was very low and the borrower paid up rather than lose his asset. As the amounts are very large, they do monitor each and every loan very closely.
I am not investing in their Australia loans. Had not looked at that and no intention of doing so at the moment.
Hi again Beacon,
Having read thru Zagga's definition of default, I am sure that "that" C default mentioned was the same one that I had. And I got all my money back! So, Zagga's "default" is really Harmoney "30 days Arrears"
Thanks, cool bear. I gave them a call. Found out that they did a mortgagee sale on that defaulting C, and there was no loss of investment capital for anyone, so clean chit so far. Also, it appears NZ domiciled investors can't invest in Australian loans at the moment. Will read up on them more. Cheers
https://www.harmoney.co.nz/ appears to be down at the moment
File not found.
I know, slow going.
Have eased up on the repayment/income ratio amongst other things to keep up the #s up. Taking nibbles at "not-quite-ideal" loans, while going full steam on the rare "ticks-all the boxes" types. Hopefully HM run a marketing campaign soon and increase their new business take.
Re-writes are a double edged sword I think. On one side it means an early payout, but on the re-investment side it shows if a borrower has been able to make repayments in the past. For me, knowing that past repayments have been made (over a reasonable period of time), means that will likely continue, lowering the chance of defaults.
So I tend to favour re-writes that show good past repayment history. Something you don't know with a new borrower...
https://www.harmoney.co.nz/investors...-now-available
Dated 30 Aug 2018, and notification on dashboard, but page is blank? Can anyone see content here?
Not on that page, but here is the link you're looking for :cool:
https://www.harmoney.co.nz/investors/default-rates
Hit the $1,000 mark in interest received today, so to celebrate I thought I'd share my stats :)
Date of first investment = 5 January 2018
Total Loans invested in = 602
Average amount invested = $30.36
Average age of loan in portfolio (current status) = 124.5 days
Average weighted interest = 20.49%
RAR = 13.21%
XIRR = 11.77%
Loan Book:
A: 13 loans
B: 129 loans
C: 205 loans
D: 210 loans
E: 42 loans
F: 3 loans
Thanks to everyone that has contributed to this thread, and shared their thoughts & experiences.
Attachment 9902
Attachment 9901
Well done. You are aiming high like Myles, and that s being reflected in writeoffs, and returns. Congratulations on your first grand :)
Good start alundracloud. I'm surprised your XIRR is below your RAR? Are you using Outstanding Principal + Funds Available as your current value? It could be right - I think my XIRR was always ahead of my RAR during the run-up stage. It could just be the timing of your investments or perhaps the 'fix' Harmoney made to their RAR calculation?
Thanks Myles! I've found your advice scattered throughout this thread really useful, and it probably shows when you look at my portfolio that I've tried to emulate yours somewhat, just on a smaller scale! With a bit of luck I can emulate your returns too :cool:
Below is screenshot of my XIRR worksheet. As you can see I'm using:
(Outstanding Principal + Funds Available) - (Outstanding Principal of any loans >60days in arrears)
Attachment 9904
This is a belated report of a first for me. Having been in the game since March 2015 I have had 262 loans repaid out of 537 subscribed and on 2nd May I had my first clearance of a loan which went full term - of 36 months. A second full term 36 month loan was repaid on 31 August. Perhaps my selection criteria have led towards loans which are easy to top up, but fewer than 1% going to term is, I think, a bit of an indictment of our debt laden society.
There has certainly been a lot of 'churn' in the loans - some of that is likely due to changing rates through?
[QUOTE=alundracloud;728142]Hit the $1,000 mark in interest received today, so to celebrate I thought I'd share my stats :)
Date of first investment = 5 January 2018
Total Loans invested in = 602
Average amount invested = $30.36
Average age of loan in portfolio (current status) = 124.5 days
Average weighted interest = 20.49%
They're great figures Alun - I'm very envious. Despite your loan book being high in Cs and Ds, your arrears and charge-offs are incredibly low. You've obviously got an eye for picking good loans - particularly in the current market that seems very short on them. Roll on the next $1000 :)
Those write off's are very low/good for the risk curve you have. that said at 120 days average age you have a very young portfolio, Most of the write off's dont happen until the loan is 120-180+ days in arrears so normally loans are 150-210+ days old at the youngest - so it will be very interesting to see if you can keep it up once your average age reaches ~200days
Thank you Joker- Really appreciate your kind words, and your contributions to the thread!
As Humvee points out in the post above, it's still a very young portfolio- I only really started investing in earnest in March. I'm realistic about the fact that arrears & write-offs will become more frequent as time goes on. I've definitely found myself passing on more and more loans recently- the quality just doesn't seem to be there at the moment. I'm really going to tighten up my criteria (more high B's & C's and only the "best" D's & E's) from now up until Christmas. This is based on some of the comments earlier in the thread about loans taken out in the lead-up to Xmas experiencing a higher rate of defaults.
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 wish Harmoney would include a columns to show the following in their export All of which are missing currently
Date Charged Off
Date Sold
Date Paid Off
The closest I can do to kind of calculate the average charge off age is the following
=[@[Last Payment Date]]-[@Date] filtered for where the status is Charged off and the last payment date is NOT blank
The average of this is 457 Days - which is ALOT older/higher then I was expecting
You can get the individual charge off dates for each loan in the report section. It is time consuming but I transcribe the charge off dates for all the loans charged off in each month at the end of the month into a spreedsheet. I will work on a graph later and post it here.
This is my chart as promised. I have been in for just over 39 months (so in my 40th month). The chart shows that most of my charge offs are after 8 months (i.e. in its 9th month). So if you are in for only 1 year and assuming you invested gradually, your average age of your loans is only 6 or 7 months. So your charge off will not be that much yet.
Yes, investing in Harmoney does take more time than other investments. But alot of it is to get information that is good to know, not all essential.
I used to update my main spreadsheet every week but now only once a month.
More on my 377 defaults in the chart above, the average is 13.26 months from date of loan and that will grow much more the longer I am in. At the moment, I am in for only 39.1 months and my oldest is 36.8 months.
The median is 11.81 months and I expect this to eventually settle at just about 12 months.
5 charged off out of 262 repaid. Months in for them were 16, 29, 13, 13, 13 - the last one I have been expecting to charge off for 3 months and no payments in that time. Much the same as Cool Bear's portfolio in terms of time in versus losses. I don't worry about losses as it is part of the game, but 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.
Wow I had a loan written off and now I see 100% of it has been recoverd. Great success !
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]
Attachment 9907
Let us say there are 4 loans on the market. In separate markets, retails only see 1 loan, wholesalers see only 3 - both lose. Alundracloud proposed Harmoney went back to its previous practise (my understanding) of listing all 4 on retail market first, some of which came through autolend, giving retail some time to peruse and buy them before they all unfilled portions got filled at various times (like 3pm) during the day by wholsesale. In that scenario, yes some loans were filled by retail more than 25%, but both markets had more loan volume to participate in. Thus increasing choice/diversification for both.
Unfair? This is P2P space. No wholesaler should be here by definition. While the borrowers should be grateful the wholesalers fill them here which they would not necessarily have done in traditional banking space, and the lenders should be grateful that wholesalers ensure more loans get filled/ get filled quicker, wholesalers should be grateful they are allowed to be in this space at all. The lending requirements are much more stringent for them in their own space. Surely, TSB et al have no cause to cry unfair when they are making a 9+% return to date on diversified lending without a dollar spent on infrastructure. Wholesalers cherry pick too through filters, albeit in a more limited way than retail, but shouldn't it be like this anyway in this asset class? At least they have a table here. The small guy doesn't even get to sit at the high tables...
Appearances can mislead. Harmoney is a business, and they do what is viable. Without retailers, they wouldn't be in the P2P space at all. It should be in their best interest to arm investors with better information to increase their RoI, but they hide behind 'can't advice'. It should be in their best interest to help answer investor queries promptly at least about book-keeping and data reporting anomalies but one has only to read this thread to see how much lender angst and concern has been aired in more than 200 of those pages. Most of the retail lenders, including me, are still here because they have limited alternative investment choices, but a hope that with time spent here to pick loans individually there is a fair chance that they can reduce risk and lift their RAR here. In reality, in the first few years, they are really getting paid for their time, without which they will have a RAR no better than the wholesalers (who by the way, I believe spend no time loan picking).
I think Harmoney will benefit immensely if they list all loans on retail market first, and can sort out their bookkeeping and data reporting errors. Interest credited to account gets reduced the next day, defaults are added to default columns in data months after the loan has been paid off, paid off loans are still shown as current months after outstanding principal becomes 0, there are gaps/errors in loan information when they are listed, filters could be improved still, and I doubt their payment protect calculations make sense to any more than 1% of their lenders. They certainly don't balance in my books, so I hope their auditors are paying special attention to payment protect.
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.
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'll second that too, and I suspect sub 10% returns are here to stay, partly as a result of that.
I know some won't agree, but I think the definition of Peer to Peer Lending is not what some think it is.
Peer to Peer Lending is more about doing away with the middle man i.e. the Bank. (Same as P2P file sharing - doing away with the central server)
All the meaningful definitions of Peer to Peer Lending that I have seen, describe a Peer as an individual or business (yes typically a small business, but businesses none-the-less). Harmoney's model, in my view, is still Peer to Peer, it just includes some very large business peers as investors. Quite a few of the borrowers are businesses, possibly not all small, depending on your definition.
There are some platforms that are more focused on the individual/small business only model, but from my experience they are very difficult to invest in and have significantly less loan volume. It has been suggested that some of these platforms are considering allowing 'larger' investors in to 'grow' their business model.
I think it is fairly obvious that Harmoney would not be the size that it is without Wholesale investors.
Like it or not, Harmoney's model is working for Harmoney, borrowers and and most investors.
I agree. And TSB is a Bank! Mind you, I have no problem with Banks playing here (see my previous post), so long as they do not disadvantage the native players in the P2P space. At 85% wholesale, especially when retail investors are complaining about the lack of loans and fall in loan quality, Harmoney is really not in the P2P space. P2P was supposed to disrupt the banking industry to the advantage of small players on either side of the middleman. That advantage is all but gone for retail investors (in an environment of diminishing investment returns and investment options in the country) when Harmoney becomes wholesale funded to such a large extent.
Agree. I welcome wholesale funders to come and help grow this alternative industry through all platforms mulling their involvement, so long as they do not disadvantage their smaller peers, who by the way have no entry in the lending sector otherwise...
Ignorance is bliss. Harmoney (and all P2P platforms) have a promising role to play in our society, and profit should not blindside us into letting them become mere fronts for big institutions. This industry should strive to become what it could be. A booster to all factions of local economy from the grassroots up. And that includes the small guys...
Twisting my word a bit: "middle man i.e. the Bank.", is nothing like TSB investing as a peer.
There is no such thing as a 'native player' - nothing stopping an individual or small business becoming a wholesale investor (provided they have whatever the minimum buy in is?) - a group of peers could do it...but the returns are currently not as good. Same goes for a 'wholesale' type business investing as an individual - but paying someone to invest in loans or rely on auto-invest would likely have a poorer outcome.
What any borrower does with the money/where any investor gets the money, has little to do with it. Nothing stopping me taking out a loan from a bank and investing it in Harmoney... Nothing stopping me taking out a loan with Harmoney and investing it in a bank... For that matter, nothing stopping me taking out a loan with Harmoney and reinvesting it in Harmoney (Money for nothing - playing in the background).
The traditional savings process in a Bank *is* a form of lending i.e. you give the bank your money, they invest (lend) it however they see fit, they give you pittance back (middle man takes too much).
The only way you will dictate terms of a P2P business is to create one yourself, or convince borrowers to demand non-wholesale peers - neither, I suspect, is likely to happen. Borrowers already have that option with other platforms (though they may not know it?).
Harmoney, as far as I can tell, are still in the red, so need to make some headway to be around for the longer term - wholesale lenders contribute to that.
The most likely mechanism to attract more loans is to reduce interest rates - as an investor, that's not what I want to see...
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.... Attachment 9910
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.
You are correct as far as my establishing the matrix, but I don't want to exclude loans below the lower limits on each grade, as they have even lower risk than my matrix, so I effectively use the matrix as 0 - 3000 and ticking all boxes will allow me to do the odd F
0-25,000 is OK for A
and so on for ones in between.
I don't consider over $25K (except I have once or twice when the repayment to income threshold was very low and the loan excess was marginal.
It's really hard to create a matrix and not subsequently find something slightly outside, but which is worthwhile.
Indeed BJ1. I, on the contrary, haven't taken loan size into consideration yet, as Harmoney already has ceilings for each Risk Grade. I am also not too strict on repayment ratios, as a DSR of 35% is vouched for by many. Harmoney repayment ratios are more loosely defined than DSR, making them riskier. But as an anomaly spotter, what simple things would you advise a noob to be aware of?
I have read somewhere in the past that Harmoney financials are audited. Personally over the 42 months that I have invested, the financial side has always been 100% spot on according to my spreadsheet that I update daily.
There are sometimes reporting anomalies regarding loan information on the platform but less hang ups than in the early days. I feel confident in the money side of things in my account.
I have no concerns about my funds Permutation - my audit interest lies in their processes and the accuracy of what they give us to make decisions on.
Beacon, there is so much of what I have learnt over a lifetime in money that it is hard to impart, either in this forum or by PM. However, I will add that the majority of families need to allocate above 25% of pretax income to accommodation, be that rent or mortgage (majority, not all by any means) and so the theoretical maximum available for other finance costs should be 10%. I hardly ever lend if the repayment to after tax income exceeds 10% as it is quite likely that, no matter what the applicant says about debt consolidation, there will also be a credit card on drip feed in the background.
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!
All $'s - I should have formatted them that way.
So under Defaulted Loans:
Invested: is $ invested in the loans that have defaulted (i.e. purchase of notes)
Interest: is $ of interest returned from the defaulted loans (prior to defaulting)
Payments: $ paid by borrower prior to loan defaulting
Loss: = Invested - (Payments + Interest) $'s [i.e. what I lost from initial purchase of notes)
Total Invested: is total $'s I have invested in that grade (all loans)
The rest should be obvious?
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%
Hi Myles
Thanks for sharing.
In addition to Snow Leopard's point, you also did not take into account fees. Assuming your fees is 15%, then following the same A5, you paid 15% on the 10.99% interest received. But you lose the "whole" write off.
One year calculation (assuming no arrears) and taking the case of the A5.
You invested a total of $500 and you had one charge off of $50. Your interest received is $450x10.99% + $4.31 (that $50 charge off) = total interest $53.77 for the year. Less 15% fees is $45.70
Less principal written off $43.13 = net gain after fees of just $2.57. So you end up with just $502.57 at the end of the year or a return of just 0.51% (not the 3.23% in your table).
Fees affect the higher grades more.
Thank you BJ1. Be interesting to watch how the results unfold - your cautious ABCs vs Myles daring CDEs vs Cool Bear Index ( I think he's closest to being an index, out of all who care to consistently share here). Looks like a sunny day all around for Harmoney fans today. Enjoy the sunshine, all! :)
I take the comments above, but the point I'm trying to show is the rate/value of defaults per grade. Defaults are not annual, they are total over the life of all loans - the %Loss is based on total invested value per grade, not current or final value (so loss of potential interest is not included).
I take Cool Bears point on fees, so I've added that in - it had no effect on the overall trend, but it could have. Tax is at a portfolio level so I'm not including it deliberately.
I know the last column is meaningless, but I find it to be indicative of the return for the grade.
Updated with 15% loss due to fees:
Attachment 9918
The key thing I take from these values is that the expected, larger default losses for higher grades is not what I'm seeing. So selection criteria can impact expected defaults and averages - significantly.
Myles, I agree with your point on that the higher grades may end up having better returns but the true results comes only when all loans in a cohort have seen out their terms.
However, my point on the fees is more about your last two columns - fees on interest from the performing (non charged off) loans. The fees on interest from the non-performing (charged off) loans would hardly affect the returns as you rightly point out.
The chart below shows the age spread of both my current loans and loans that have defaulted.
Orange: Age spread of current loans - scale on the left axis (example: there are 130 loans that are 15 months old)
Blue: Age spread of defaulted loans - scale on the right axis (example: 4 loans defaulted 6 months after purchase)
Attachment 9920
I have no clue why month 8 and 9 are so low in relation to loans defaulting - just an anomaly due to low number of overall defaults at this point in time I guess.
An informative graph I think - for my loan set it shows that a good portion (~35%) are now out of the 'default' danger zone.
Notes:
- Loan default date is taken as charged-off date, not last payment date.
- Three of the charged-off loans are currently still being paid...Harmoney data errors......
- This would be a great graph to have time-lapsed, but it's just too much work to be bothered...
Another graph that helps paint a picture of loan characteristics:
Orange: Age spread of current loans.
Green: Age of paid off loans.
Attachment 9922
So a large portion of my loans are repaid at the 4th month through to at least the 8th month.
Notes:
- Around 80% of my loans are 60 month term loans
- In 18 months I have purchased over $220,000 worth of loans from a total deposit of $100,000 (no withdrawals)
- The last interest rate adjustment may have had a significant impact on the timing of paid off loans?
- It's worth noting that the original $100,000 was invested in the first 3 to 4 months, all loans purchased after that have been paid from $'s returned from paid off loans and interest.
- I have been increasing loan size in recent times (~ 4-6 months) to help keep up with re-investment (not represented in the graph - I should do the same graph but use $ value?)
- Around 35% of my original $100,000 loans have progressed past 14 months!
Something that I found when looking through my data set is that none of the re-written loans have defaulted!
This could be partly due to timing and the limited time frame of my loan set, but I find it very interesting.
Cool Bear, is this something you could chart with your extended data set? Just the same as your previous default graph, but only include loans that have previously been re-written i.e. positive value for Previous Loan Pay-off (re-write) column.
I dont have any Write offs on rewrites - I do however have a number of arrears , hardship, protect waivers etc
Including some that are 180+ days in arrears
Attachment 9924
Further to Coolbear and Snow Leopard, That analysis although interesting overlooks much. Defaults, will create a drag on your return - due to the capital not being recuperated so interest is foregone.
Fee should be applied against all interest.
Early repayment amplify's the impact of default, especially in the higher grades. Without the benefit of your data, would say your E5 grade is returning closer to 12% rather then 19%. See attached.
Attachment 9930
That said your DEF grades are performing very nicely, and well below the predicted static loss ranges indicated by HM, so you must a knack for risk selection
I re-invest 'early repayments' - so shouldn't the months be 14 with the associated increased interest and fees?
This wasn't the point I was trying to highlight. The point was the %Loss column - for my loans it is clearly more advantages to invest in higher grade loans based on loss due to defaults (when interest is taken into account). Compare the %Loss column for B5 vs D4 or B4 vs E3 and then consider what the return for each will be... Higher grade loans, for my loan set, are not showing increased default losses as would typically be expected (include the interest gain and it should be obvious how significant the gain is).
The reinvestment principal is independant, so in the case of E5 - if you were to reinvest the returned capital back into a E5 loan it should have the same characteristics and return 12% in this example (eg expected default of 4.5% per year, 35%pa of early repayment, etc).
Agree with that, you are showing incredible risk selection at the DEF grade. I find it incredible that your D grades are outperforming your C's. Your E grades are showing a static loss of 4%, HM are showing a static loss of 7.7% on the 2017 cohort. So you are doing 50% better then the platform, a impressive record!
I don't agree with your calculation - as per my previous comment - early repayments are earning interest not included in your determination of 12% - defaults have already been factored in for all loans (these were actuals for the full period, re-investment included).
I've calculated my actual return for just those E5 loans as 16.99% (pre tax), 19.98% without fees.
Some of the original loans are still current and earning 38.25% interest :) [rates over the period include: 38.25, 26.95, 28.69]
This was why I approached the comparison from the actual loss side, much easier to calculate than trying to calculate the actual gain, which has to be done on an individual loan basis...and why it is pointless generalising the final value...
[Calculated by weighting individual returns and annualising both returns and default losses.]
Hi Myles. The intriguing thing about your data, is your loss on the lower grades being significantly less. If you select well, you can exploit thoses pockets, at the lower grades.
What we have to consider, given the age of our portfolios (both being immature), is how each individual cohort will run. By continually repurchasing, you will be witnessing the performance of a mixture of cohorts with a younger average loan age - higher interest relative as a portion of monthly repayments, less loans reaching 120-180 days in arrears etc.
HM annual average default is misleading. Rather I prefer to look at cohort default across the full term. Taking HM forecasted stats for Grade "E", their default forecasts are approx 4.5% per annum, or 22.5% across a 5 year term. To validate this, taking the 2014 E grade performance off the "historical annual default rate tool " https://www.harmoney.co.nz/investors/default-rates - shows that the cumulative default of E grade at 22.7% (and running to a similar place on 2015 and 2016 cohorts). Critically the definition of cumulative default is based on the number of loans originally funded, not the loans outstanding.
How is the cumulative default rate calculated?
The cumulative default rate is calculated by dividing the total number of defaults by the total number of loans funded. For example in 2015, for grade C3, 447 loans were funded and 17 loans defaulted to the end of 2017 creating a cumulative default rate of 3.8%.
How that reads to me, is early repayment is not factored in. If HM were to publish annual default based on time in lent, the number would be significantly different. ie If 22% of your E grade loans are going to default, and 78% remain good - how are your stats going to look if 40% of the good ones repay early in the first 12 months!
To run some really crude numbers, here is a mocked up example on 5 year on E5. I've used heuristics to make the stats less complicated (no hazard curve, timing of cash at start of period).
Attachment 9931
Ultimately I'm not in disagreement with the part of your analysis that compares relative defaults between the grades. If you can select DEF grades which will default at the same rate as BC's - then fantastic. And those lucky enough to get in at 38.25%, kudos and am jealous. But rather trying to throw questions for those who may otherwise assume that 20% gross returns are readily achievable at todays rates.
I would do the calculation as below. I'm not sure where your repayment values are coming from in your second table?
Attachment 9933
Notes:
- The second table shows re-investment of both paid-off loans and interest, as well as cumulative defaults (if only you could cash out like this).
- The first table doesn't allow for 5 years due to fund shortfall at 4th year - so I just paid it out at that point.
You are on the right track. I mucked up the 2nd table, and for that matter the 1st wasn't right either - double counting defaults. I've refined again :) Works out at somewhere between 12-15%.
In that simple model, if are able to achieve a default of 3% pa (or 15% over the term), return lifts to just under 20%.
Attachment 9936
This is the analysis I'm running for my Cohorts.
For each cohort population (by month), I've taken HM interest rate and annual default rates. Using this data & early repayment date i'm able to track the expected performance through the loan term.
Shows that my current cohorts are running at approx 15.1% after fee, against expected RAR of 14.5%. Am showing that overall full term RAR is projecting at 10.5%. Which reflects the much lower expected RAR under platform 1.5 pre May18.
Note - am only modelling cohorts older then 6 months, to allow early repayment data to settle down.
Attachment 9941
Market place is Busy this morning, 11 Loans - 100% rewrites, a number of good ones
Unfortunatly Ive moved most the my spare $ to lending crowd so almost none available to invest,
But Ill bet the money comes flooding back into my account once these loans are gone due to early repayments
Attachment 9942
First time I've been < $25 available funds for a long time :)
Did you catch the defaulties ? in a few of them.
yep there was a B grade default, although you wouldn't have seen that on your filter. Didn't see any other defaulter though!?
Managed to plough a good amount in this morning, my "weekly" deposits have been turning into daily ones - certainly great news for HM users - even if most are rewrites....
Another graph...trying to get a feel for loan pay offs:
Attachment 9943
Blue: Number of loans (held in month)
- shows my initial ~3 month 'buy in' period
- followed by slow increase due to reinvestment of interest over time
- more recent slight decrease as I purchase more notes per loan (so number of loans decreasing)
Orange: Loans paid off (in month)
- appears to lag number of loans by around 6 months (i.e. significant loans paid off at ~6 months)
- first, large peak - most likely due to the interest rate adjustment in Aug/17 that saw a huge fall in rates (so wise borrowers rewriting loans)
- second, smaller peak, not sure, (i) an 'echo' 6 months on from the first peak or (ii) a post Christmas anomaly? (probably an 'echo')
Notes:
- I'll continue to purchase more notes per loan, which should see the overall loan number drop, and 'workload' (reinvesting rewrites) reduce.
- A general view of paid off loans, for me, appears to be a pay off rate of around 5-6% of loans per month, so 60-70% of loans rewritten each year.
- Difficult to see the trend, but I'm not liking the slow rise toward the end :(
I'm avoiding a lot of those "maxed out loans", under the thinking that the higher debt/income ratio would result in repayment difficulties - with no ability to rewrite out of trouble.
Incredible result Saamee. What type of risk grades are you investing in? Is it a large portfolio?
Some new noob/whale is sucking them loans up today lickte split - most likely doesn’t know about loan diversity.
41 loans in the last 24 hours, so they say but I only saw one. And I check several times a day. And, yes I also got quite a few earlier in the week, but struggling again now to invest as I want.
Just checked and there were 4 loans there and I only managed to get one and that was not one I would normally invest in.
It is starting to be like lending crowd here.
Certainly were 41 loans yesterday. Picked up a good deal of those
Attachment 9967
You are right to an extent Soolaimon, that need to be quick on the uptake. However unlike LC, at least there is the volume currently and the option of autoinvest. Even if loans don't linger around for hours anymore. Several of the loans I'm getting the "RED SCREEN" (coincidently as I type - attached). Think that the red screen indicates a Big Fish (or several biggies) are attempting to buy the loan out in its entirity.
Attachment 9968