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Loan Modification NPV Calculator
HAMP-style NPV test drives loan mod decisions. This calculator compares mod NPV to foreclosure recovery.
Decision
Foreclose
Modification NPV
$206,966
Mod vs foreclosure
-$13,034
How the math works
Mod NPV = PV(payments) × (1−redefault) + foreclosure recovery × redefault × 0.9. Compare to direct foreclosure.
Low-redefault-probability borrowers (stable income, prior cure attempts) benefit most from mods. High-probability redefaulters should go straight to DIL or foreclosure — mod just delays the inevitable.
How to Use
- Enter modified monthly payment.
- Enter months of modified term.
- Enter discount rate.
- Enter foreclosure recovery.
- Read NPV comparison.
Frequently Asked Questions
What's the NPV test?
Compare PV of modified cash flows (with redefault probability) to expected foreclosure recovery. Mod if PV > foreclosure. Industry standard since HAMP era.
Redefault?
25-40% of mods redefault within 12 months. Discount cash flows for this. Aggressive modifications with low payments redefault faster.
Discount rate?
8-12% typical for distressed-mortgage cash flows. Higher spreads for riskier borrowers. Align to loan rate + credit spread + illiquidity premium.
How often should I rerun this?
Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.
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