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Treasury Department Reveals Loan Mod Formula With Release of NPV Calculator
May 23, 2011

The U.S Department of the Treasury and the U.S. Department of Housing & Urban Development (HUD) have announced the release of a new Web site,, designed to assist homeowners in calculating a net present value (NPV) evaluation of their mortgage for the federal Home Affordable Modification Program (HAMP). The site can be used by homeowners who have been denied a HAMP modification due to their NPV result. Homeowners can enter the NPV input values listed in the HAMP Non-Approval Notice received from their mortgage servicer after a loan modification denial, or substitute with estimated NPV input values, to compare the outcome provided by against that on the Non-Approval Notice. "The NPV is for people entering their own information as a homeowner and it requires all the documentation, including income, expenses, arrears, fees, etc.," said Steven Gillan, executive director of the American Alliance of Home Modification Professionals (AAHMP). "It is asking for a lot of info that most homeowners may not have, and if the homeowner does not plug all of the info in correctly, how can a correct determination be made under the NPV?" The calculator can also be used by homeowners prior to applying for a HAMP modification to help them better understand their NPV evaluation. One issue encountered with determining value is that so many transactions are foreclosures, and do not represent an accurate determination of the market. RealtyTrac's Year-End and Q4 2010 U.S. Foreclosure Sales Report, found that foreclosed homes accounted for nearly 26 percent of all U.S. residential sales during 2010, down from 29 percent of all sales in 2009. "This is good for the homeowner who knows what they are doing, but not good for someone who may not have all their documentation together," said Gillan. "The main problem is that you need to determine an accurate current value of the property ... an accurate determination of value is vital to the decision-making process, as you need an appraisal, not a broker price opinion [BPO] nor an automated valuation model [AVM]." The launch of is the latest move by the Treasury Department in their mission to better streamline HAMP. Last week, the Treasury announced new HAMP guidance requiring that certain servicers provide borrowers with a single point-of-contact (SPC) through the entire default resolution process. Mortgage servicers, including Lender Processing Services Inc. (LPS), have adopted their own SPC solution to keep pace with the Treasury Department's mandates.   
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