TILI and NET PRESENT VALUE

Unlike the Rest Report, the TILI report represents an real view of considerations by the mortgage loan Servicer / Investor regarding a tactic that is in their best interest. Details considered by the Servicer / Investor can be considerably different but in numerous cases the TILI report will provide a close representation of these considerations. Parameters can be changed, but will not save for each individual case file.

The TILI and the NPV report will reflect whether the Borrower is qualified for a mortgage modification based on the information provided. Based on these details, the report will review the actual considerations by the Servicer/Investors based on net present value (NPV) and present value (PV) return streams. These considerations ultimately provide the Servicer / Investor with the insight to render a final decision.

You will notice that the TILI report does not focus on the long-term rate of return for the Servicer/Investor. Characteristically, servicers receive a fee for servicing the mortgage. Investors typically are not focused on retaining the security until the last payment is tendered. Therefore, the TILI report focuses on immediate failure and success ratios without consideration of the total value of the security for the Investor if they retain the security until the last payment is made (and neither does the Investor).

Net present value test - HAMP payment reduction

Includes the incentives that the Servicer/Investor would receive if they pursue a HAMP modification. The report also extrapolates further considerations based on the possible failure rate after the HAMP modification is initiated (12 months failure/success rate). The current HAMP data reflects a failure rate of about 70% on HAMP modifications that have been initiated thus far. The final consideration by the Servicer/Investor will be based on the TOTAL PV success ratio

Liquidation

Represents a conclusion based on foreclosure of the property. Includes costs and fees as well as a standard 20% discount of the property value based on current home market values. Typically, you will find that it is in the best interest of the Servicer/Investor to liquidate the property to prevent further losses (see HAMP failure rate)

Principal forgiveness - enhanced HAMP

Represents a conclusion based on the Servicer/Investor reducing the principal balance to 115% CLTV of the current home market value. The monthly payment will mirror that of the traditional HAMP modification, but with a higher interest rate to match the traditional HAMP modification payment. The current HAMP data reflects failure rate of about 50% in these cases. The final consideration by the Servicer/Investor will be based on the TOTAL PV success ratio

Short refinance

Can be viewed as a possible refinance for the current Borrower or a short-sale of the property. The success ratio is always considered 100% because a 'fresh' Borrower is usually supplemented for the current Borrower. One critical point, you will notice that the payment is exactly the same for a traditional HAMP modification and in the enhanced HAMP programs. When modification is successful, the present values (PV's) of the loans will be the same for both. The real change is the change of success (30% vs 50%). Keep in mind that the problem with a HAMP is that it addresses the ability to pay; it does not address willingness to pay. Based on current HAMP data, the willingness to pay increases if the Servicer/Investor applies a principal balance reduction. Also, if the Servicer/Investor is willing to apply a principal balance as well as offer a lower interest rate, then the success ratio will increase therefore improving the TOTAL PV of the enhanced PV program. Finally, keep in mind that by applying for a mortgage modification, the Servicer/Investor is at that point keenly aware that the Borrower cannot afford the current monthly mortgage payment. Their focus will default to seeking a resolution that is in their best behalf, not the Borrower's.