Denied For HAMP Because You Failed NPV Calculations – What is NPV Test?
By: Anna Cuevas; The Loan Mod Guru
Where you told that you were denied for the HAMP Loan Modification because you failed the NPV calculator and you are wondering what that means?
Most borrower have no idea what an NPV calculator is and don’t have a clue why they failed it.
Here is the Definition of NPV as it relates to Home Affordable Modification Program:
The “NPV Test” (NPV is “net present value”) is a formula used to determine your eligibility for a loan modification under the HAMP Program. The purpose running an NPV calculation test is to decide if the investor of your mortgage is in a better profit position by approving you for a modification (basically which choice gets more money to their bottom line) or if they would have a higher profit margin by allowing the property to foreclose. This formula takes many different factors such as current value, foreclosure costs, resale time and compares this with payments on the reduced rates, how much principal they would have to defer interest free to make you qualify under 31% of your gross (pretax) income, after the other “waterfall process” steps the HAMP underwriting guideline require in order to lower your payment were first calculated, along with the risk in possible repeat default, and many other figures that are called values. In other words, it is the comparison of two formulas with multiple factors, that are then compared to see which is greater in profit to the investor of your loan. The investor is usually not the same as your servicer.
If the borrower is not approved for a HAMP modification because the transaction failed the NPV calculations, then the servicer must, explain what the NPV means tell you the factors used to make the NPV decision and advise you that you may request the values used in making the calculations along with the date the process was completed within 30 days of the notice of denial. and dates. The reason they have to provide this information to you is to give you the opportunity to make any necessary corrections to the values they used as they make or break your ability to be considered eligible for the Home Affordable Modification Program.
You or your authorized representative, can request the specific NPV values verbally or by writing to the servicer within 30 calendar days from the notice date and they must answer your request within 10 days.
If you request the NPV values and you have a foreclosure sale pending the servicer must not complete the foreclosure sale until 30 days after they deliver those values to you to give you time to correct the inaccurate values. If there are any.
Once the evidence that the NPV values used were inaccurate, the servicer has the burden to make the necessary verifications to see if the corrections are material to the outcome of the NPV.
Some values don’t affect the outcome and do not warrant a change from the original NPV. If you find inaccurate values in the NPV calculations and you follow the protocol for advising the lender then your servicer must reconcile the inaccuracies prior to proceeding with any foreclosure sale.
As always the best way to win at the loan modification game is to learn everything you can about the process so you can be empowered and successful with your loan modification and saving your home. Be prepared to question and challenge the lender and get the information that was used to you have the right to obtain.
Save Your Home