| Re: what is npv???
rozuki -
I've been trying to figure out the same thing. I think it means this:
The bank determines what they could sell the home for after they foreclose on you in today's current market. Then they use some sort of formula to determine what the realtor, advertising, maintenance, etc. might cost and subtract that off of it. I'm thinking the number left would be the net present value.
Then, they determine the amount they would make if they modified your loan (not principal payments but interest). You can determine that by googling "mortgage calculator" and plugging in your numbers. I think the interest over the life of the loan needs to be higher than what they would receive if they foreclosed, sold the home, subtracted the expenses.
Not sure if that's it but I have been seeing that phrase as well and wondering what it was and discussed it just this morning.
I've been thinking that the banks are looking to see if they reduce the interest down to an amount that fits you into the 38% or 31% ratio debt to income over 40 years and the interest rate nets them over the life of the loan less than what they could foreseeably sell the home for in today's market, you don't pass the test.
Does that make sense? |