Is there a standard Net Present Value (NPV) model?
Treasury developed a base NPV model that servicers must use to determine whether a Home Affordable Modification provides the investor with a better financial result than if the modification had not occurred. If the NPV test is positive, the servicer must modify the loan. If the NPV test is negative, the servicer has the option of modifying the loan, but is not required to do so. While most assumptions in the model will be the same for all users, each servicer has limited discretion to use a discount rate that is appropriate for their portfolio not to exceed 250 basis points above the Freddie Mac Primary Mortgage Market Survey rate. Additionally, servicers that have at least a $40 billion servicing book have the option to use estimated cure rates and re-default rates based on their own experience, rather than using the rates in the base NPV model. A plain English description of the NPV model can be found at www.HMPadmin.com. Is there a hardship requirement? Yes. Every borrower and co-bo
