Most people have never heard of this. Those who have really have no concept of what it is. Yet it’s in the Making Home Affordable Modification Program. It is one of the tests to determine if the person facing foreclosure qualifies for a trial loan modification. What is it?
The Net Present Value Test
This is a test the mortgage company does to see if the investor will get a better return on the money they put up for the mortgage by modifying the loan than they would if they foreclosed on the property and sold it. How is the test done?
- The mortgage company calculates what the monthly payment would be if the loan is modified.
- That is multiplied by 12 months.
- That total is multiplied by 30 years.
- If the final total is more than the amount the mortgage company will get by foreclosing and selling the property, a trial loan modification would be worthwhile. If it isn’t, it would be better for the mortgage company to proceed with the foreclosure and sell the property.
The Problem with the Net Present Value Test
While the guidelines in the Making Home Affordable Modification Program require the test, they do not require that the mortgage company make the calculations or the outcome of the test known to the person facing foreclosure or their representative. They can just tell them that the proposed modification to the loan failed the Net Present Value Test and the trial loan modification was denied. Let me run that by you again.
The Proposed Loan Modification Failed The Net Present Value Test.
The Mortgage Company Does Not Have To Give the Results
To the Person or Their Representative
They don’t have to share the results with anyone. Let me tell you what I feel is wrong with that.
First – there is no standard guideline to determine how much a foreclosed property will sell for. That varies from city to city, from neighborhood to neighborhood, from street to street and from home to home. How can anyone be sure that the amount the mortgage company arrived at is accurate?
Second – Who is to say that the person at the mortgage company responsible for figuring out how much a home may sell for didn’t make a mistake in their calculations?
Third – The person facing foreclosure and their representative have no opportunity to contest the test and to submit their own findings which may show the results to be wrong.
Most of the mortgage companies are secretly guarding not only the results of these tests but also their formula for determining value from a sale.
If You’re a Victim of a Net Present Value Test
Don’t just sit back and accept what your mortgage company is telling you. Get the local organizations in your community involved. Let them know what happened. Report it to your local newspapers and television stations. Most television stations have a reporter handling consumer affairs. Talk to them. Let them know how your mortgage company has zapped you. Contact your state representative and senator. Also contact your congressman. You want to get as much public attention as you can focused on your mortgage company so that they have no alternative but to reconsider your request for a loan modification. They may never reveal the results of the Net Present Value Test but they most probably will grant a trial modification.
Stay One Step Ahead of Your Mortgage Company
If you are facing foreclosure and want to save your home, you cannot rely on your mortgage company to help you. The track record so far shows mortgage companies doing little to modify the loans of people facing foreclosure. You have to be prepared to take control of the process to save your home. In order to do that you have to know as much as you can about what you can do. My EBook has a lot of information which I am sure that you would find useful. You can find out more about it by clicking Stop Foreclosure.
Much Success,
Mark Elkins
