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Treasury's Secret Formula Slows Loan Modifications

But one thing's clear: it favors banks, not homeowners

By Kevin Spak,  Newser Staff

Posted Sep 16, 2009 8:15 AM CDT
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(Newser) – 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.

In this photo made May 7, 2009, a foreclosure sign is shown through a front gate of a foreclosed home in Oakland, Calif.
In this photo made May 7, 2009, a foreclosure sign is shown through a front gate of a foreclosed home in Oakland, Calif.   (AP Photo/Paul Sakuma)
In this May 28, 2009 file photo, a foreclosed home is shown in Mountain View, Calif.
In this May 28, 2009 file photo, a foreclosed home is shown in Mountain View, Calif.   (AP Photo/Paul Sakuma, file)
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It’s more art than science. Who knows whether the borrower will default, what the value of the property is, what will happen to home values? I’m skeptical of
all of it. - Guy Cecala, publisher of Inside
Mortgage Finance

They’re still operating from the premise that ‘we don’t want you to make loan modifications that aren’t going to make more money than a foreclosure.' - Guy Cecala, publisher of Inside Mortgage Finance, on the Obama administration

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COMMENTS
Showing 3 of 6 comments
Guest
Oct 4, 2009 2:40 AM CDT
The government blew it again. If they had given the money they gave to the banks to taxpayers instead, those that have jobs and didn't have enough for a down payment would have had a downpayment and bought homes. This would stop the housing crisis. If they didn't buy a home they would either spend the money or save the money. Either way this would help the economy. Spending it would create jobs to provide stuff people purchase. Saving the money would end up in the banks and they could then loan money to those with ability to repay loans. Giving the money to the banks has done nothing to improve the economy and never will. I'm 25 years in my home, wifey had her hourly rate cut 25% because her company is loosing contracts. I can't float the boat with her 25% less. If they'ed adjust my monthly payment it would be better for all involved. But the greedy bank wants the home instead of keeping me in it. So I loose everything. But what the hey. . .it's the American Way. I wish Credit Union's could loan amounts great enough to purchase homes. . .the common man would be better off if he had an interest in the company doing the lending. I've never been late on any payment in my life. . .66 years. For all the good the politicians have been doing I'm now in the worse situation I've ever been in my working life since I was 12 years old. CHASE has turned me down for loan modification twice, saying I didn't send proper documents. The first time I had a CHASE banker go over every doc, said everything was complete, he faxed the papers where they should go. 2 weeks later I get a call from CHASE, didn't get what we needed. So, I faxed everything updated again. 2 weeks later same thing. Didn't get docs. . .wifey, (in menopause), took the call. Told them to get off their butts and find the paperwork. . .we had submitted everything needed twice. 2 weeks later, loan mod request denied. Looks like CHASE bank want bankrupt properties. Cheers, otrpu
Guest
Sep 22, 2009 9:58 PM CDT
Does anyone remember a time when debt wasn't the norm...?
Guest
Sep 18, 2009 12:20 AM CDT
fuckers
Money • US

 
mortgage • Treasury Department • mortgage modification • loan modification

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