HAMP modified to include new Net Present Value disclosures and handbook
Fannie Mae has released a new HAMP handbook that consolidates and clarifies the procedures that loan servicers are supposed to implement in the evaluation of loan modifications. The 170 page publication can be viewed at https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/mhahandbook_30.pdf,
In addition, Fannie has issued Supplemental Directive 10-15 which provides guidance to servicers on implementation
requirements for Section 1482(a) and (b) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. 111-203) (Dodd-Frank Act). https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1015.pdf
requirements for Section 1482(a) and (b) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. 111-203) (Dodd-Frank Act). https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1015.pdf
Under the Dodd-Frank Act, in circumstances when servicers reject borrowers for loan modification because a failure of the "Net Present Value Test" ["NPV"], servicers must now provide additional information regarding the ASSUMPTIONS made in the evaluation process.
The NPV test is financial modeling tool that compares the relative economic benefit to the INVESTOR of offering a loan modification versus immediate liquidation of the property through foreclosure sale. The NPV test details are not available to the public. The test is a black box based on assumptions regarding property value, FICO scores, income, other debts and a variety of 33 inputs.
Starting February 1, 2011, servicers must provide more detail and the opportunity to dispute the inputs including the property value. If property value is in dispute, borrower's can demand an appraisal if they pay a $200 deposit. Furthermore, the Treasury Department will issue a public version of the NPV financial model which will soon be available for public use.
The hope is that this new law will shed additional light on the decision making process of HAMP loan servicers and lead to more accountability.
