FHFA Working Paper 11-1: The HAMP NPV Model …

FHFA Working Papers Working Paper 11-1 The HAMP NPV Model : Development and Early Performance1 The foreclosure crisis that began in 2008 triggered the need for new approaches to treat distressed mortgages. 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 some important 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.

Authors’ Note: The Home Affordable Modification Program (HAMP) is arguably the federal government’s most important intervention into housing markets to encourage loan modifications for distressed homeowners. The creation and rollout of the Net Present Value (NPV) model was a

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  Programs, Home, Modification, Affordable, Home affordable modification program

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