Tag Archives: NPV

HAMP modifications part 1 of 7: NPV, the “secret formula” that determines your eligibility

There is a “secret formula” which is determining whether you are eligible for HAMP (Home Affordable Modification Program) loan modification. It is called the NPV-the “net present value”.
What is this formula? I found two descriptions:
Description #1: This first is a brief description from the “Frequently Asked Questions” portion of a government document:
“Apply a Net Present Value (NPV) test to determine whether the value of the loan to the investor will be greater if the loan is modified (factoring in the government’s incentive payments) [versus if the loan is foreclosed and the foreclosed house sold by the foreclosing lender]. If the modified is not of greater value [greater NPV] the investor and servicer may still modify the loan. However, modification in such cases is not required. Please note: Your servicer may re-run the NPV test before the modification becomes official if they receive new information that could affect your NPV score. If the modified loan is of greater [NPV], the servicer must offer you a modification under HAMP, and, if you accept the offer, will put you on a trial modification (typically three months) at the new payment level. [ ] Misrepresenting any information required for the Home Affordable Modification is a violation of Federal law and has serious legal consequences.” Revised June 8, 2010, a copy is available at: http://www.makinghomeaffordable.gov/about-mha/faqs/Pages/default.aspx
Note that a list of servicers that have agreed to participate in HAMP modifications is available at a government website. Also included is a list of those HAMP programs (there is more than one HAMP program-adding to the confusion) in which the respective servicers have agreed to participate at: http://www.makinghomeaffordable.gov/get-assistance/contact-mortgage/Pages/default.aspx
Description #2 of NPV test-This description comes from an on-line post by an “in the trenches” individual who has claimed to have participated in and successfully completed 100 modifications:
January 2010: “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. 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.”

HAMP modifications 7 of 7: HAMP Modifications – Documents and info normally including in your HAMP request.

How do I apply for a modification under HAMP?

If you meet the general eligibility criteria for a modification under HAMP, you should gather the financial documentation that your servicer will need to determine if you qualify (See “What information and forms will I need in order to be considered for HAMP?”). Once you have this information, you should contact your servicer and ask to be considered for a modification under HAMP. The servicer’s phone number and email address is on your monthly mortgage bill or coupon book. Please be patient yet persistent. Your servicer may be handling a large volume of inquiries about the program and it may take some time before your servicer is able to process your application.

If you would like to speak to a housing counselor, call 888-995-HOPE (4673). HUD-approved housing counselors can help you evaluate your income and expenses and understand your options, and apply to your servicer for HAMP. This counseling is FREE.

If you have already missed one or more mortgage payments and have not yet spoken to your servicer, call your servicer immediately.

What information and forms will I need in order to be considered for HAMP?

Recently, Treasury announced a more streamlined homeowner evaluation process. Now, in order to apply for a Home Affordable Modification, homeowners can submit proof of income (See “What proof of income will I be required to provide with my HAMP application?”) plus the following two forms:

The MHA Request for Modification and Affidavit Form (RMA). This Form captures information on borrower income, expenses, subordinate liens on the property, and liquid assets. It includes a Hardship Affidavit, fraud notice, and information about the Trial Period Plan.

The Internal Revenue Service (IRS) Form 4506T-EZ (Short Form Request for Individual Tax Return Transcript). This form gives permission for your mortgage servicer to request a copy of the most recent tax return you have filed with the IRS. After you have completed the form, print two copies—one for your records and one to send to your mortgage servicer.

Visit the “Request a Modification” section of MakingHomeAfordable.gov for more detailed information.

What proof of income will I be required to provide with my HAMP application?

Be prepared to submit a copy of your two most recent pay stubs that show year-to-date earnings. If you are self-employed, you must provide your most recent quarterly or year-to-date profit/loss statement. Visit the “Request a Modification” section of MakingHomeAfordable.gov for more detailed information. If you cannot find the required documentation, or have questions about the paperwork required, please call 888-995 HOPE (4673) and ask for “MHA HELP.”

I’m self-employed. How do I get a copy of my most recent quarterly or year-to-date Profit and Loss Statement?

Contact your CPA (Certified Public Accountant) or the licensed tax professional who assisted you in completing your tax documentation.

What types of documentation would be considered reliable enough to validate “Other Earned Income” for HAMP?


Other earned income (bonus, commission, fee, housing allowances, tips, overtime) must be documented by your employer in either your paystubs or other employment paperwork/contracts. Homeowners are encouraged to work with their employers to gather this information to describe the nature of the income and the continuity of the income.


57BHow do I get evidence of benefit income (e.g., social security, disability, death benefits, pension, public assistance, adoption assistance)?


You can provide a copy of benefit letters/statements, disability policy, or receipt of payments such as copies of two most recent bank statements showing electronic deposit of benefits. For additional information regarding social security, disability or death benefit income, contact Social Security directly toll-free at 1-800-772-1213 or visit their website at www.socialsecurity.gov. For all other benefits, you must contact the provider directly for additional information.

52. How do I get evidence of unemployment benefits?

Evidence of unemployment income may currently be obtained through the Department of Labor UI benefit tool, which is available at http://www.ows.doleta.gov/unemploy/ben_entitle.asp. After the Home Affordable Unemployment Program (UP) becomes effective on July 1, 2010, unemployment benefits and severance pay will no longer be acceptable sources of income for HAMP consideration. (See “Home Affordable Unemployment Program (UP)” for more information about help for unemployed homeowners.)

My rental income was not reported on last year’s tax returns because the property was vacant. What documentation do I need to validate rental income?

In such cases where a property has recently been rented, a signed Rental Agreement contract must be provided to show: the property address, date of contract, lessees name and address, rental amount and rental period. The contract must be signed by all parties (lessor, lessee, rental agents etc.)

How do I get a copy of my Divorce Decree, Separation Agreement or other legal written agreements filed with a court (e.g., alimony or child support)?

Gather the information listed below and contact the Office of Vital Statistics in the state where your divorce occurred. The homepage of the state’s website will provide a link/information on how to contact the office of Vital Statistics. Generally, the documentation needed may include, but is not limited to, the following:

Date of your divorce

Full name of spouse

Your driver’s license number

Purpose for which record is needed

Your name and address, together with a self-addressed, stamped envelope

See the June 8, 2010, government publication re: info relevant to this post: http://makinghomeaffordable.gov/docs/BORROWER%20FAQs_6-8-10.pdf