Obama Loan Modification NPV Calculation - How Your Lender Evaluates You - Part 10 of 10

 To understand if your lender will consider you for a loan modification under the Obama Loan Modification program you must understand how your lender will calculate their financial benefit. This article describes the Net Present Value (NPV) calculation is and how your lender will use it to evaluate your mortgage modification application.

NPV Test: Every loan that is either in feasible default or, by the calculation of MBA delinquency, is not less than 60 days delinquent will require an NPV Test which will weigh the NPV of cash flows expected from modification against the NPV of cash flows expected from no modification. If the modification scenario's NPV is of greater value, the result of the NPV is positive. Having a positive NPV is not a requirement of a Domestic Economical Modification and any connected lender/investor, servicer, and debtor payment.

Model of the Standard NPV Test: In order to give a standard industry-wide procedure to the mandated NPV Tests, the Treasury will establish a model of the Standard NPV with specific parameters. Each component will be outlined and detailed below.

Discount Rate: The servicer is allowed to select the discount rate that will be used for the model NPV. This discount Rate is subject to a ceiling determined by the Plan and sensitive to the cost of funds determined by the market. The ceiling will be defined as the Freddie Mac Primary Mortgage Market Survey rate (PMMS), added to 2.5 percentage points. This PMMS is defined as the normal mortgage rate that is published in the H.15 bulletin of the Federal Reserve.

The servicer is allowed to select different discount rates for loans in portfolio and loans in investor pools, but can not give different rates for separate loans in the servicing book. To demonstrate, a servicer can assign a Discount Rate that is equivalent to the sum of the PMMS and 2.0% for investor pools and a discount Rate that is equivalent to the PMMS for loans in portfolio.

Re-default and Cure Rate: The Re-default and cure Rates will be determined by using an equation based upon GSE analytics and data from the Plan portfolio (below). The Treasury will update these tables regularly from incoming data, receiving help from a group of government officials from other agencies.

Valuation of Property: Property value will be determined in accordance with the Guidelines.

Do You Qualify and How to Apply:

To see if you qualify and learn how to apply for Obama Loan Modification Program you can visit:

http://www.obama-loanmodification.com

By Frank Stevenson

Which provides you with valuable resources including:
- Top 10 most frequently asked questions about the program
- Up to date guidelines on if you qualify
- Insider tips
- Free sample hardship letter

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