The HAMP NPV model: development and early performance
AbstractThe foreclosure crisis that began in 2008 triggered the need for standardized tools to evaluate distressed mortgages as candidates for modification. A key component of the Obama Administration’s Home Affordable Modification Program (HAMP) was the development of a standardized Net Present Value (NPV) model to identify troubled loans that were value-enhancing candidates for payment-reducing modifications. This paper discusses the development of the HAMP NPV model, its purpose, and the constraints that dictated its structure and limitations. We describe the structure and the estimation of the model in detail. Furthermore, we describe the responsiveness of the model to key characteristics, such as loan to value and credit score and provide new evidence on the relationship between HAMP modification performance and key borrower and modification characteristics. The paper concludes with a discussion of model limitations and suggestions for further refinement of the model.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32040.
Date of creation: 02 Jul 2011
Date of revision:
mortgage modification; loan modification; HAMP; Home Affordable Mortgage Program; NPV test; Net Present Value Test; distressed mortgage;
Find related papers by JEL classification:
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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2009-17, Federal Reserve Bank of Atlanta.
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- Manuel Adelino & Kristopher Gerardi & Paul S. Willen, 2009. "Why don't lenders renegotiate more home mortgages?: redefaults, self-cures, and securitization," Public Policy Discussion Paper 09-4, Federal Reserve Bank of Boston.
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