May 232011

Even though HAMP is facing a tragic end at the hands of members of Congress, the Treasury Department is still trying to improve HAMP.  First up, Treasury published a new HAMP rule last week, requring the biggest servicers (e.g., Chase, Bank of America, GMAC, etc.) to establish a single point-of-contact for borrowers trying to get a loan modification.  This means that a homeowner that initially qualifies for HAMP will have one name, one phone number, one person to turn to every time they call the servicer for help, instead of the current myriad of nameless, faceless, random people who provide varying qualities of service, whose only information comes from whatever notes the last few nameless, faceless, random representatives typed into the system. 

The second tool the Treasury rolled out (although I haven’t been able to find it on their website yet) is an online NPV calculator.  OK, let’s back up a minute.  We all are familiar with the basic requirements to qualify for HAMP:  the borrower (a) must live in the house, (b) have a monthly payment > 31% of gross income, (c) have a loan balance under $729,750, and (d) have gotten the loan before 1/1/2009.  If all of these are true, you are supposed to be considered for HAMP.  However, there is another test the borrower has to pass that, so far, has been conducted in a dark room in the far recesses of the servicer’s basement:  the NPV test.  Basically, this test is supposed to determine whether the lender will make more money by modifying the loan than if it forecloses.  There are a lot of factors that come into play in this determination – the market value of the house, discount rates, the liklihood the borrower will default again, the current humidity level in Toledo, and the amount of wood a woodchuck would chuck (if a woodchuck would chuck wood).  Oh, and I think it uses calculus.  There is a reason I went into law, and calculus is one of those reasons (sorry, Mom).  Anywho, it’s been a “black hole” of sorts when trying to guess whether a particular homeowner will get a loan modification or not.  Earlier this year, the Treasury allegedly required the servicers to disclose the numbers used in this calculation.  However, there wasn’t a good way to try to guess the ultimate result before enduring the HAMP application process. 

So, there is now supposed to be a handy-dandy online calculator we can use.  As I said earlier, I haven’t been able to locate it on any of the Treasury’s websites (it may still be in that basement).  When I do find it, I’ll give it a try, and compare it to the results I get with the other two tests I use:  (1) gut feeling, and (2) the Magic 8 ball.  I’ll let you know what happens!

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