“When Mortgage modifications have a positive NPV, it is in the best interests of lenders, servicers, investors, and borrowers to modify mortgages to reduce the risk of foreclosure.” - US Treasury Department
Fort Lauderdale, FL (PRWEB) April 14, 2011
It's no secret that our nation's economy is in a slump. There have been many negative consequences on the American people as a result of the recession, including an increase in foreclosures. But in an effort to prevent foreclosures, more and more people are pursuing loan modification. Loan modification alters the terms of the loan to prevent default. But in order to be considered for loan modification, a homeowner should pass the NPV test. The NPV test measures the net present value (NPV) of your home. If a homeowner passes the NPV test, they will be approved for a loan modification. The NPV test isn't required, but it can help. An online version of this test can be found with United Resources Solutions' Website. Even the US Treasury Department has recently said that it is the only certain way of getting a loan modification.
When someone is seeking loan modification, they can take the NPV test in order to see if it will help to avoid foreclosure. The NPV test takes the homeowner's cash flow and factors in the loan costs with loan modification and without loan modification. If the NPV test is positive, then it means that the homeowner would have greater cash flow with a loan modification. The NPV test is a great way for lenders to evaluate whether or not a modification would actually help the homeowner or not. If it wouldn't help homeowner, then there's no point in doing it.
The main purpose of a loan modification is to prevent foreclosure. Foreclosures are a big loss of income for the bank as well as a blot on the borrower's credit record, so it's generally in everyone's best interest to prevent foreclosure. Often, a loan modification can alter a loan slightly so that the borrower is able to pay for it. The NPV test can give the lender a better idea of how helpful a loan modification would be. The NPV test is easy to run, and the NPV test is a great way to save time. If the borrower passes the NPV test the borrower will be approved for a loan modification.
The NPV test is such a good indicator that the United States Treasury Department has even stated that passing the NPV test is the only sure way to be approved for loan modification. The documents from the Treasury Department go further, stating that “When Mortgage modifications have a positive NPV, it is in the best interests of lenders, servicers, investors, and borrowers to modify mortgages to reduce the risk of foreclosure.” It's a good idea to take the NPV test if the borrower is having a hard time paying their mortgage. A loan modification can help to make a borrower's loan more affordable. If the borrower is serious about getting a loan modification, take the NPV test. It's the best bet at getting the loan modification that is needed.
A good resource, and an NPV loan modification test can be found at the
United Resources Solutions site.