We recently agreed to represent a Massachusetts homeowner in her efforts to obtain a loan modification with Bank of America (“BOA”). She had been working on the modification by herself, and appeared to do a pretty good job. In March, 2010, she received a letter from Bank of America that began with “You qualify for a permanent modification of your home loan under the Home Affordable Modification Program.” (emphasis in the original, underline added).
This particular person had already been through the trial plan and given BOA all of the supporting documents they had requested. The letter acknowledged as much: “Thank you for meeting the terms of your Home Affordable Modification Trial Period Plan by providing your financial information and making your trial payments.”
BOA “strongly encourage[d] [her] to continue making monthly mortgage payments in the amount of [her[ trial period payments”, while she was “on the lookout for a package in the mail”. Accordingly, the homeowner continued to make monthly payments (which were accepted and applied to her account). After 7 months of paying her mortgage, on November 22, 2010, she received a letter stating that rather than receiving the final modification package, she was in fact being sent a denial letter. That letter began with:
We have received your request for a loan modification under the federal government’s Home Affordable Modification Program. Unfortunately, your loan is not eligible for a Home Affordable Modification for the reason stated below: Negative NPV.
A NPV is a “net present value” test, which is done to determine whether the lender/ investor is better off financially to modify a loan or simply to foreclose on the property. The homeowners income and the market value of their property are integral parts of this determination.
Regardless of what the results of the NPV test actually were, the NPV determination should have been conducted prior to the March 30, 2010 approval letter. Moreover, we are left to question why a NPV test was even done, after the approval had been granted, based on documentation that would have been 7 months old at the time – as anyone that has been reviewed for a loan modification is keenly aware of, banks are constantly demanding updated documents that are more than 30 days old. Yet, here, the bank dhas obviously disregarded or forgotten the prior approval it already gave, apparently more willing to consider documents 210 days old (at least) in order to deny the woman they had already approved.
Copies of the letters used for the approval and the denial can be viewed here. They both appear to be boilerplate, auto-generated letters that I am sure are sent to thousands of homeowners. I would be interested in hearing from anyone that has received an approval, like the one attached, followed by a denial, by BOA or any other lender.