The Obama administration’s mortgage modification program has been a big disappointment, and part of the reason could lie in the invisible hurdle troubled homeowners have to clear to get their mortgages renegotiated: the NPV test. Devised by the Treasury, the secret formula is designed to determine if modification is in the bank’s—not the homeowner's—best interests, Pro Publica reports. If the bank benefits more from foreclosure, the bank can tell consumers to take a hike.
The Treasury says the NPV is an “objective” test, but it won’t release the model it’s based on, which would have to be built on a number of subjective assumptions, like how long foreclosure would take and a home’s value. “Someone needs to be able to review it,” says one consumer advocate. Others are frustrated that the NPV’s basic purpose is to protect banks, not citizens.