Housing market - With mortgage stress at record highs, what...

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danbradster

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29/05/18

14:27

Post #: 33354109
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Originally posted by nocelery ↑

Disclosure: this is my largest holding, so I have a very strong interest in this stock appreciating (further).

Thought I would share something that I learned about Money3.

Many of you know that Money3 makes it money off the differential of (interest and fees) charged to customers less the cost of operations, bad debts and interest paid on funds.

You probably also realise that as Money3 get scale, it's cost of funds will decrease thus increasing profit margin.

What you probably do not realise is that one of those fees is a hidden gem called an "application fee" that turbo charges profitability. On a mortgage, the application fee is tiny in comparison to the mortgage itself and the mortgage life is relatively long (7-8 years before refinancing/sale), however the Money3 loan life is usually 1-2 years (guesstimate), and the loan value is small (under $8K), so the application fee becomes like cream (5-10% of the loan value I estimate) on top of a loan that is paid back in 1-2 years (guesstimate). This snowballs the capital that can then be re-lent out. The only risk I can see is bad debts and an overvaluation of the P/B ratio - although I think it is justified based on the growth.

Do any of you have insights into their revenue streams or risks other than the ones I mentioned?

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Housing market - With mortgage stress at record highs, what happens to outstanding MNY loans (say car loans) when house prices fall, mortgage repayments rise and/or more people default on their mortgages?

It's a risk, but I have little idea what effect it would have. It's just the biggest risk that I foresee.

MNY Price at posting: $1.92 Sentiment: Buy Disclosure: Held
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Housing market - With mortgage stress at record highs, what...

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