The Secret Test That Ensures Lenders Win

[Robb]

The Secret Test That Ensures Lenders Win on Loan Modifications

“NPV Test: Failed.”

That was the red-lettered verdict on the computer screen of a CitiMortgage negotiator in June. The result: An 83-year-old widow in Illinois was denied a loan modification through the Obama administration’s Making Home Affordable program, even though the employee admitted in an e-mail, “I am unable to come up with a reason for the denial.”

(snip)

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,’” Cecala said. “This is very different from what community groups see as the (program’s) purpose.”

(More...)

[Robb]

1. Kick. nt

[gratuitous]

2. If CitiMortgage gets in trouble with their loans

Ah well, no biggie. If CitiMortgage refuses to renegotiate any loans because they won't be as profitable, they'll just slip another ransom note under the door of Congress, and help themselves to several billion more taxpayer dollars. Sucks to be an individual consumer, but then we could have all chosen to be anonymous money-grubbing banks and corporations. Long live the "free" market, where risk is socialized and profit is privatized!

[alstephenson]

3. There are so many variables in a net present value calculation.

They probably have it rigged so that it is difficult to pass the NPV "test", but they can say that they made "every effort" to modify the loan. Crooks - all of them.

[AllentownJake]

4. Thank you Evan Bayh

The biggest opponent to allowing people have mortgage relief in the Senate.

His wife being on 5 corporate boards probably didn't hurt his opposition.