NPV Calculation in Loan Modifications

Every year, families across the United States fall behind in their mortgage payments. The result of this defaulting frequently results in foreclosure. There are several ways to stave off this problem. One of them is to apply for a loan modification. In order to do this, however, you must pass the NPV test.

What Is NVP?

NVP is the abbreviated form for “net present value.” It is a financial idiom referring to the difference between 2 integral parts of financial worth: income and outgo. The NVP of these terms is the differences between the present incoming cash and the present outgoing cash.

The purpose of NVP is to abet lenders in appraising a long-term project for possible investment. In other words, the calculation of the NVP permits companies to determine whether an investment will be profitable.  To accomplish this, the involved companies or persons utilize a complicated, secret formula. This prevents the individuals from possibly adjusting the factors involved to work in their favor.

What Does NVP Mean For Loan Modification Applicants?

If you want to modify your mortgage loan, you have to apply to your bank. Basic qualifications are:

• You must be a minimum of 60 days behind in your payments or
• on the path of inevitable default

When you apply to the lender, it will do an NVP test. This compares the present net value of your current cash flows as it stands in terms of your mortgage and the present cash flow as it would appear with a loan modification. If the company foresees a profitable result and not a future default, it may grant you a loan modification. If you fail the NVP Test, you will not get it.

How To Calculate NVP In A Loan Modification

There is no way you will be able to find the exact formula used for NVP. They do not permit this to be made public. As a result, you must do what you can within the parameters of the guide provided on NVP. Take into consideration the following aspects:

• The value of your home
• A reason why you really will do anything to stay in your home
• A reason why you are not up-to-date and how a loan modification will improve your financial wherewithal to pay the mortgage on time and regularly. Include a budget, your bills, and a comparison of current income and expenses that bear reference upon your situation.

Consult An Attorney

Talk to a foreclosure law firm. A skilled lawyer will help you prepare the paperwork. He or she can be instrumental in passing the NVP test and obtaining a loan modification.