Discounted Payoff Calculator

DPO benefits both parties when foreclosure costs exceed expected recovery shortfall.

UPB

Property value

Foreclosure cost % of value

Lender target recovery %

Suggested DPO offer

$400,000

Lender foreclosure net

$352,000

Lender upside over foreclosure

$48,000

How the math works

Foreclosure net = value − foreclosure cost. DPO = UPB × target. Upside = DPO − foreclosure net.

$400k − $48k = $352k foreclosure net. DPO $400k vs net $352k = $48k lender upside vs foreclosure.

How to Use

Enter upb.
Enter property value.
Enter foreclosure cost % of value.
Enter lender target recovery %.
Read suggested dpo offer.

Frequently Asked Questions

DPO economics?

Lender perspective: DPO above expected REO net recovery is gain. Typical DPO 50–80% of UPB on distressed assets. Foreclosure all-in cost: 5–15% of property value (carry, broker, repair, attorney). Borrower perspective: DPO discounted from full payoff is debt forgiveness. Tax: forgiven debt is ordinary income unless excluded (insolvency, bankruptcy, qualified principal residence indebtedness through 2025). Process: hardship docs + equity verification + 30–90 day timeline + lender investor approval (CMBS slow, GSE fast).

How does this debt analysis fit a workout strategy?

Workout, default, and recapitalization decisions depend on the gap between in-place debt and current asset value. Lenders evaluate cure cost, foreclosure timeline + cost, broker price opinion (BPO), and borrower equity. Borrowers evaluate equity in the property, refinance feasibility, and forbearance economics. This calculator provides one input to that multi-factor decision.

Discounted payoff (DPO) vs forbearance vs deed in lieu?

DPO: lender accepts less than full balance to avoid foreclosure cost, common with non-recourse and underwater assets. Forbearance: payment deferral 6–18 months, balance accrues, useful when value will recover. Deed in lieu: borrower transfers title to lender, faster than foreclosure but lender takes full risk. DPO often best when borrower has new capital + lender wants quick exit.

Special servicing dynamics?

CMBS loans transfer to special servicer at default or maturity default. Special servicer compensation aligns with workout, but timeline is 6–24 months and fees stack ($25–250k+ in costs). Whole-loan and balance-sheet lenders move faster but with less flexibility. Bridge and debt fund lenders most flexible. Time-to-resolution and total friction cost should be weighted in any borrower scenario.