Discounted Payoff Acceptance Calculator

Lenders evaluate DPO offers against time-adjusted foreclosure recovery.

Loan balance

DPO offer

Foreclosure net recovery

Foreclosure months

Cost of capital %

DPO advantage over NPV foreclosure

$667,779

Foreclosure NPV

$7,332,221

Write-off from balance

$2,000,000

How the math works

Foreclosure NPV = recovery ÷ (1 + monthly rate)^months. Advantage = DPO − NPV.

$8.1M ÷ (1 + 0.833%)^12 = $7.33M NPV. DPO $8M = $670k advantage vs foreclosure NPV.

How to Use

Enter loan balance.
Enter DPO offer amount.
Enter expected foreclosure recovery.
Enter time to foreclosure months.
Enter cost of capital %.
Read NPV comparison.

Frequently Asked Questions

What is a DPO?

Discounted payoff — lender accepts less than full loan balance to release lien and close out the loan. Common during distress. Typical DPO structures: (1) borrower pays cash today for release, (2) borrower provides partial payment + deed-in-lieu for remaining, (3) third-party (often debt fund) buys note at discount + manages out. DPO is final — once accepted, lender has no recourse to borrower for deficiency (typically). Debtors prefer: no credit event like foreclosure.

How does lender evaluate a DPO?

NPV comparison: DPO cash today vs expected foreclosure recovery minus time + cost. Lender math: $10M loan, $8M DPO offer vs $9M expected foreclosure recovery minus $300k legal minus $600k carry (12 months at $50k) = $8.1M foreclosure net, in 12 months. NPV at 10% COC: $8.1M / 1.10 = $7.36M. DPO $8M > $7.36M NPV — accept. Different lenders use different discount rates; bank vs CMBS special servicer have different frameworks.

Why would borrower do DPO?

Save credit from foreclosure. Salvage some equity if loan balance > current asset value. Close out deal cleanly for tax purposes (can be taxable cancellation-of-debt income in some structures). Preserve relationships with guarantors. Move on to next deal. Often combined with discharge of personal guarantee — key negotiating ask. Lender gives up deficiency claim in exchange for earlier close and higher net recovery. Win-win when numbers work.

How to negotiate DPO?

Lead with third-party appraisal showing asset-value basis for offer. Document sources of cash (lender insists on proof of funds). Offer 10-20% above lender's expected foreclosure net recovery to win acceptance. Include closing timeline (30-60 days from signed LOI). Include all terms (personal guarantee release, mutual release of claims). Engage specialized workout counsel. Don't try solo — DPO structuring has specific legal/tax framework experienced counsel knows.