Net Present Value & Your Mortgage Loan Modification

What is Net Present Value and how does it affect my chances to modify a mortgage loan?

Many banks will use net present value assessments in determining whether to offer distressed homeowners a loan modification, but often do not explain how those values are calculated.  Net present value assessments (NPV) help a bank determine the true value of an investment today.

Do I Want it Higher or Lower?

When determining whether or not to offer a modification, your lender will use a NPV assessment.  As a general rule, if your NPV with a modification is higher than your NPV with your mortgage "as is," meaning under the terms you currently have, your lender will likely be willing to offer you a modification.  Each bank has created their own formula to calculate NPV scores and will not share that information for "proprietary reasons."  For this reason, many clients are left in the dark as to how willing their bank is to modify their loan, or how much relief their bank is willing to offer in terms of reduced interest rates and lower monthly mortgage payments.

How You Can Check Your NPV

To help consumers get a better understanding of NPV assessments, the U.S. Treasury Department has recently launched a website called CheckMyNPV.com.  The website allows users to input their own information and receive a NPV assessment using the same formula the government has devised for the Making Home Affordable plan, or HAMP.  While the calculation does not necessarily mean your lender will be able to offer you a HAMP modification, it does get users familiar with the information your lender is looking at when making their decision.