The HAMP NPV model: development and early performance

Steve Holden, Austin Kelly, Doug McManus, Therese Scharlemann, Ryan Singer and John Worth

MPRA Paper from University Library of Munich, Germany

Abstract: The 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.

Keywords: mortgage modification; loan modification; HAMP; Home Affordable Mortgage Program; NPV test; Net Present Value Test; distressed mortgage (search for similar items in EconPapers)
JEL-codes: D18 G21 R21 (search for similar items in EconPapers)
Date: 2011-07-02
New Economics Papers: this item is included in nep-ure
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https://mpra.ub.uni-muenchen.de/32040/1/MPRA_paper_32040.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/32406/1/MPRA_paper_32406.pdf revised version (application/pdf)

Related works:
Journal Article: The HAMP NPV Model: Development and Early Performance (2012)
Working Paper: The HAMP NPV Model – Development and Early Performance (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:32040

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