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A House Appraisal Could Change Your Lender's Mind About Foreclosure

Many Americans facing foreclosure thought that HAMP would help them get a loan modification to make their mortgage payments more affordable. Unfortunately, many hopeful applicants were rejected from HAMP because of the NPV.

NPV stands for "net present value." It is a calculation that lenders use to decide whether it would be more profitable for them to grant the homeowner a loan modification or foreclose on the property.

Lenders may use a home value service to determine the current market value of the property. Lenders use the house appraisal, the cost of foreclosure, and the resale time to determine the cost of foreclosure. Conversely, lenders consider the reduced rates, principal balance, deferred interest and the possibility of repeat default to determine the cost of loan modification.

When the cost of each of these transactions is totaled, the lender can see which path will ultimately be more profitable to them.

If you were denied for HAMP because your lender decided they could make more money by putting you in foreclosure, you can appeal the NPV. You can request the values you lender used in this calculation to make sure there were no inaccurate numbers.

You must request these values verbally or by mail within 30 days of your notice of denial for loan modification. Your lender must respond within 10 days and refrain from foreclosing on the property for another 30 days. This allows you time to look over the values and make sure there was no inaccurate information.

If you find that you lender made a mistake, you have another shot at loan modification. If you cannot find any errors, you have at the very least avoided foreclosure and lived in your home--mortgage free--for another month.