• DYE CULIK PC | Consumer Protection Division

NPV Test Calculator Released to the Public for Loan Modification Evaluations

What is the Net Present Value (NPV) Test? The NPV Test is a mathematical formula that takes a number of factors into consideration to determine whether it will be in the bank’s financial interest to foreclose or to perform a loan modification under HAMP, the Home Affordable Modification Program.

The U.S. Department of the Treasury has finally released this test today for anyone to try, online. The website is online at:


By entering information about your mortgage, such as your income, credit score, property value, mortgage balance, and interest rate, you can finally run the same test that your mortgage servicer is running and potentially be able to tell if you mortgage servicer has wrongfully denied you for a loan modification, or if they should be able to qualify you for a loan modification when you apply for one.

When HAMP started in spring of 2009, the NPV Test that mortgage servicers ran on homeowners’ loan modification applications was secret and there was no way to determine whether the bank was accurately reporting when homeowners passed or failed the NPV Test. This was changed when the Dodd–Frank Wall Street Reform and Consumer Protection Act was passed in 2010.

The concept of a Net Present Value Test is not unique to the HAMP loan modifications. Investors have used some form of an NPV test for some time to evaluate whether to take risks by developing projects, businesses, and investments.

Under HAMP, however, the test is whether the loan modification is in the bank’s best interest — not yours. Even if the modification would be affordable for the homeowner, but not produce the most benefit for the bank, then the bank is not required to perform the HAMP loan modification.

Luckily, however, in most cases, a loan modification will be in both the bank’s and the borrower’s best interest. This is because the amount that the bank will get at a foreclose sale is usually less than the amount of the mortgage, whereas the amount the bank will get from a loan modification and the payments of both principal and interest over up to 40 years will be far more than just of the principal amount of the mortgage.

(This can get complicated, however, when the mortgage servicer and the investor that own the mortgage are two separate entities. When this is the case, which it is with a large number of mortgages, then there is a financial incentive for mortgage servicers to foreclose even though a loan modification would be in the investor’s best interest. You can read more about that in an article titled Why Servicers Foreclose from the National Consumer Law Center.)

CheckMyNpv.com is an excellent and timely resource that at-risk homeowners can use to see if they may be eligible for loan modifications under HAMP.

And remember, if your mortgage servicer treats you unfairly or deceptively, don’t give up — you can usually find help through a housing counselor, your state attorney general’s office (we are located in Massachusetts, so we point our clients to the Massachusetts Attorney General), or a private attorney who is willing to litigate against the bank.

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