Article Image
News Link • Federal Reserve

The Secret Test That Ensures Lenders Win on Loan Mods

• Pro Publica
The Treasury Department has refused to release the exact formula for the NPV model, bringing criticism from homeowner advocates and industry experts. Cloaking the NPV formula in secrecy makes it difficult to identify any potential flaws in the design of the program, which has generated fewer modifications than anticipated
The purpose of the NPV test is to indicate to lenders how to make the most money off of a particular borrower. Ironically, homeowners who have more equity in their home may be at a disadvantage

If the NPV test ultimately churns out a “negative” result, meaning the lender will make more money by denying the modification, the homeowner won’t get a Making Home Affordable modification unless the lender agrees to take a loss.

“Even though the administration is promoting loan modifications, they’re still operating from the premise that ‘we don’t want you to make loan modifications that aren’t going to make more money than a foreclosure  “This is very different from what community groups see as the (program’s) purpose.”

Join us on our Social Networks:


Share this page with your friends on your favorite social network: