At the Law Office of Linda C. Garrett, an online, Solano County, California-based Consumer, Bankruptcy and Family law practice, I receive several calls per month from distressed homeowners informing me that their home is in foreclosure (or they are considering short-sale) because they do not, per their loan servicer, qualify for a loan modification through the Making Home Affordable Home Affordability Modification Program ("HAMP"). Many times, the letter they receive from their servicer does not give an explanation for the denial. If their loan servicer does give a reason, many times it is to state that their loan modification application failed the "NPV" test.
What are NPV tests; Are they Important; and, Can They be Challenged?
What is a NPV Test
NPV stands for "Net Present Value" test. The NVP test is the end result of a loan servicer, entering various "inputs", using proprietary software, created by the U.S. Department of the Treasury, to determine whether or not a homeowner qualifies for a loan modification. The proprietary (and carefully guarded) software is used by mortgage servicers to determine whether the NPV test derives a positive result or negative result. A positive NPV means that the lender (or investor) of the mortgage has strong incentive to work with the homeowner to modify his or her mortgage. The reserve is also true, if the NPV test is negative, the lender (investor) has little to no incentive to work with the homeowner to modify his home loan.
Many "inputs" are put into the proprietary software. They include, but are not limited to: 1) gross income; 2) current (or soon to be adjusted) mortgage payment; 3) tax payments; 4) insurance payments, 5) current value of the home; 6) loan amount, and many others. Depending on the numbers and figures inputted into the proprietary software, the test will result in a positive result or negative result.
The underlying goal of the NPV test, in a nutshell, is to help the investor determine whether it is financially beneficial for the investor to modify the mortgage.
So, is the NVP test important? Absolutely! It's a make-it-or-break-it test.
When Do You Receive the NPV Inputs From Your Servicer?
Homeowners usually receive their NPV Inputs when they appeal their initial loan-modification denial. For example, the first letter they receive from their servicer may state that they have been "denied" and provide no reason for the denial. The denial letter may (or may not) state that they have 30 days to appeal the denial. If submitted timely to the servicer by the homeowner, the servicer is then required within 30 days to provide the specific reason for the denial. Some outlined reasons for denials include: 1) insufficient information; 2) incomplete documentation; 3) too much income; 4) too little income; and/or 4) failure to pass the NPV test. Depending on your servicer, he may or may not have provided you with a proper Notice of Denial Letter Re NVP inputs. Click Here to view a sample HAMP Notice of Denial Letter. https://checkmynpv.com/sites/all/themes/npvtool/pdf/CheckMyNPV-HAMP-Non-Approval-Notice-Example.pdf
If your lender did not voluntarily provide with the HAMP Notice of Denial Letter, outlining the specific reason for the denial, and time is on your side, then ask for one immediately. The request should be in writing and sent via certified mail AND sent via fax--to ensure they get your request. (As you probably know, loan servicers are notorious for losing documents!).
Challenging the NVP Inputs--This Is Your Right!
Most people "throw in the towel" when they receive their denial letter and/or notice of NPV inputs. Big mistake! More times than not, there are errors on the NPV test. A common error is the input the lender uses for "Gross Income." Another common mistake is the amount they input for the mortgage payment, property taxes and mortgage insurance.
Upon receipt of the Net Present Value (NPV) Input Data Fields and Values sheet, carefully review it. Start with the assumption that the lender made a mistake as to EACH input. For example, a loan servicer may calculate "gross" income to include gross income from a rental. This is a mistake. The lender is required to use the amount left over--after payment of the mortgage, taxes and insurance. What is left over (if there is anything left over) is the proper rental income figure to input into the NPV test. This alone, can cause a homeowner to fail the NPV test.
Once you have identified all errors, the next step is to promptly write a letter to back to the servicer, carefully outlining each error and explaining why the input needs to be changed.
To assists with determining servicer errors, HAMP has made a generic version of the NPV test available for the homeowner. This is a valuable tool to help the homeowner assess how the test would result, if using correct inputs. It is not a guarantee of approval, but is a very useful tool none the less. If the pass the NPV test, it would be very beneficial to include the report in your appeal letter.
How Can I Help?
• I provide a consultation to evaluate if you preliminarily qualify for a HAMP loan modification.
• If you don't qualify for a HAMP loan modification, I can explain your other options--to include pros and cons.
• Explain common errors made by self-employed homeowners and/or homeowners with investment or rental income.
• Review the inputs used by your servicer for the NPV test.
On a final Note
Keep in very close contact with your lender during the appeal process because, if you are not careful, your lender may foreclose on your property during the appeal process!
Contact me to set up a consultation.