Bank of America Department of Justice Loan Modification NPV Denial

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I have been assisting homeowners in their attempts to obtain Bank of America Department of Justice loan modifications since the inception of the program in early 2012.  During this time I have reviewed countless Department of Justice (“DOJ”) net present value (“NPV”) denials in an effort to help homeowners determine whether or not the NPV denials received by these homeowners were, in my opinion, valid declines.  The Department of Justice loan modification program is alluring to many homeowners because it allows for principal reductions all the way down to the fair market value of the home.  The possibility of such a substantial principal reduction is very attractive as an underwater homeowner.  However, while the program does allow for principal reductions the DOJ underwriting guidelines are somewhat restrictive in other ways.  Most importantly, the DOJ loan modification program does not allow for extension of the amortization period or maturity date of the note.  The inability of the loan term to be extended in any manner causes significant qualification and/or affordability issues.  For example, if a homeowner has only 21 years left from a 30 year note, the DOJ program will attempt to achieve a qualifying payment based on the current fair market value amortized over 21 years.  Keeping the repayment term within the remaining term of the loan can result in a much higher qualifying payment than would, say, a modification without a principal reduction that is amortized over 40 years.  This is especially true for homeowners that are eligible for the DOJ loan modification program that are not that underwater on their loans.

Obtaining Department of Justice loan modifications is becoming more and more difficult.  Rising property values and higher interest rates are negatively affecting the mathematics behind the DOJ loan modification program resulting in more and more NPV declines.  Additionally, as Bank of America has already met their quota as required by the Department of Justice AG settlement, Bank of America has begun removing DOJ eligibility flags.  This means that homeowners that may have been eligible for the DOJ loan modification program at one time are no longer eligible leaving only HAMP loan modifications and investor based (in-house) loan modifications as their only viable options.

Adding to the urgency of the situation is the fact that Bank of America continues to transfer the servicing of millions of borrowers to new servicers.  Once transferred, there is no guarantee that the new servicer will run the borrower through the DOJ program, even if the borrower was eligible for the DOJ program at Bank of America.

Personally, Bank of America is my favorite lender.  While I do not always agree with their decisions and while underwriting can sometimes take forever, the people that I work with at Bank of America are extremely competent and open-minded.  They work well with me to find a resolution to whatever might be causing the loan modification application to fail.

If you have any questions or would like me to review a recent NPV denial please feel free to contact me at 888-242-2272.

Final Bank of America Department of Justice Modification Obtained for Rental Property in Huntington Beach, CA

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Department of Justice Modification

Rental properties can successfully qualify for a Department of Justice modification.  The Law Offices of Michael Gaddis recently obtained a final Department of Justice modification for a rental property located in Huntington Beach, CA.  Prior to retaining Michael Gaddis, the homeowner, like so many others, had been denied for the Department of Justice modification program.  The Department of Justice modification program, also knows as DOJ, is a loan modification program that allows for substantial principal reductions.  Homeowners are frequently denied DOJ modifications due to net present value (“NPV”) and often fall into despair.  Michael Gaddis is an expert on the DOJ loan modification program and frequently reviews the NPV denials of homeowners desperately attempting to obtain a Department of Justice modification through Bank of America.  The homeowner in this situation had a rental property that he wanted to keep.  He had tried to modify on his own and through the assistance of another attorney for over two years before happening upon Michael Gaddis’ website.  The homeowner contacted Michael Gaddis in order to take advantage of Michael Gaddis’ free consultation. He forwarded his income documents and NPV denial information to Michael Gaddis who, after a thorough review, determined that the homeowner should have qualified for a Department of Justice modification.  The homeowner retained Michael Gaddis who promptly prepared a new package for the homeowner and submitted it to Bank of America. 

The final Bank of America Department of Justice modification calls for a principal reduction of $152,449.94 leaving a principal balance of $555,000.00.  As of the date of this blog Zillow valued the homeowner’s property at $688,551.  This loan modification was an incredible turn of events for the homeowner who, prior to contacting Michael Gaddis, was faced with having to short sell his property.  Upon receiving his final loan modification the homeowner told Michael Gaddis, “The best thing I ever did was pick up the phone and call you”.  The modification is a step rate modification with a starting interest rate of 2% for 5 years followed by 3% in year 6 and capping out at 3.5% for the remainder of the term.  The new modified payment of $2,960 represents an over $900 a m

As always Michael Gaddis and his staff will continue to monitor the homeowner’s file in order to ensure that 1) Bank of America receives the signed final Department of Justice modification documents; 2) Bank of America properly uploads the new modified terms into their system; and 3) Bank of America returns the homeowner’s file to regular servicing.  To view a copy of this Bank of America Department of Justice  modification as well as other successful loan modifications procured by Michael Gaddis please click the following links: and


HAMP Expiration: Modification Program (“HAMP”) Set to Expire on December 31, 2013

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HAMP Expiration:  Modification Program (“HAMP”) Set to Expire on December 31, 2013

If you have been unsuccessful in your attempts to obtain a loan modification on your home now might be the time to retain a professional loan modification expert to assist you.  According to the government sponsored Home Affordability Modification Program known as “HAMP” is currently set to end program enrollment on December 31, 2013.   While it is possible that HAMP will be extended there is no guarantee that it will.  HAMP is an extremely beneficial loan modification program that utilizes many tools (interest rate reductions, amortization extensions, principal forbearances, etc.) in attempt to create an affordable payment for qualifying homeowners.  Loans owned by Freddie Mac and Fannie Mae are automatically eligible to be run through HAMP, however, if your loan is not owned by Freddie Mac or Fannie Mae you will need to check with your Lender to determine if you are eligible for a HAMP review of your loan modification request.  If you have been struggling with your Lender and have yet to obtain a loan modification, do not waste valuable time before seeking professional assistance.  If you do not feel that you are making positive movement or if your application is lingering on appeal now might be the time to get a second opinion.  HAMP is a very good loan modification program and if it goes away lenders might only offer investor based modifications which, typically, do not provide for as favorable terms as HAMP.  Lenders such as IndyMac and Nationstar rely heavily on HAMP for processing loan  modification requests and it will be very interesting to see what, if anything, they will offer distressed homeowners if HAMP is no longer available.

In conclusion, distressed homeowners need to be aware of the looming HAMP expiration date set for the end of this year and try to resolve their loan modification issues as soon as possible.  Allowing the situation to linger could be disastrous.  For more information regarding loan modifications you may visit

Final Bank of America Department of Jusitce (“DOJ”) Loan Modification Obtained for Homeowner Located in Turlock, CA Principal Reduction of $337,957.83

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The Law Offices of Michael Gaddis recently obtained a final DOJ loan modification from Bank of America for a homeowner in Turlock, CA.  The DOJ loan modification cut the borrower’s principal balance by $337,957.83.  The principal reduction effectively reduced the borrower’s principal amount to the current market value of the house.    In addition, the borrower received a 3.25% interest rate for the first 5 years that changes into a 3.625% interest rate in year 6 and remains fixed at 3.625% through the duration of the loan.  You can review a copy of the final loan modification by clicking on the Approved Trials and Modifications page of this website.

What does this loan tell us about the Bank of America DOJ principal reduction program?  It tells us that principal reductions are real and that FINALLY a program exists that can truly help distressed homeowners.

Michael Gaddis and his staff will continue to monitor the homeowner’s file in order to ensure that Bank of America receives the final DOJ loan modification paperwork; that Bank of America properly uploads the final DOJ loan modification terms into their system; and that Bank of America returns the homeowner’s account to regular servicing.

To view a copy of the final DOJ loan modification please click the following link:

Bank of America Offers Principal Reductions to 200,000 Homeowners

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On May 8, 2012 news agencies reported that Bank of America is offering 200,000 homeowners an opportunity to apply for a loan modification that has the potential to decrease their principal by up to $150,000.  While this announcement might be exciting news to most, The Law Offices of Michael Gaddis has already seen numerous clients offered principal reductions through this program.  In fact, several of the principal reductions obtained by The Law Offices of Michael Gaddis far exceed the $150,000 quoted by the news outlets.  It is important to note that a homeowner still needs to qualify for the loan modification and the underwriting criteria and reviews are more difficult than ever at Bank of America.  For those that are able to obtain an approval, the reward could be substantial.  If you would like to see some of the offers that The Law Offices of Michael Gaddis has obtained for some clients please click on the links below.  These clients have already been pre-approved and now their modification is contingent upon the successful completion of their 3 month trial modification. $315,000 proposed principal reduction $216,000 proposed principal reduction $140,000 proposed principal reduction $340,000 proposed principal reduction $91,000 proposed principal reduction $175,000 proposed principal reduction

Chase Principal Reduction

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The Law Offices of Michael Gaddis has recently received numerous final loan modifications from Chase that contain provisions for principal reductions.  The principal reduction language in the loan modification agreements provide for a certain amount of the outstanding unpaid principal balance to be deferred and shall be treated as a non-interest bearing forbearance.  The homeowner is not required to pay interest or make payments on the deferred principal.  The deferred principal is eligible for principal forgiveness contingent upon the homeowner remaining current on their mortgage.  As long as the  homeowner remains current on their mortgage, on each of the first, second and third anniversaries, Chase will forgive one-third of the deferred principal amount.  After 3 years the entire deferred principal will have been forgiven.

If you would like to see this language in actual final Chase loan modification agreements you can go to and click on the appropriate link.

Not all Chase homeowners will be eligible for or receive deferred principal reductions, however, the final loan modifications that Michael Gaddis has received from Chase demonstrate that there is a possibility that distressed, underwater homeowners might receive principal reductions.


Bank of America Principal Reductions

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Recently, several clients of the Law Offices of Michael Gaddis have been receiving trial modifications from Bank of America with the promise of principal reductions.  The clients, were approved for trials through a new program at Bank of America created from the aftermath of the Attorney General Global Foreclosure Settlement.  For those clients that qualify, the proposed principal reductions, contingent upon successful completion of the trial period, are not trivial.  Thus far, the range of proposed principal reductions has been from $91,000 – $340,000.  Not all homeowners are eligible for the program and not all homeowners will qualify, however, for those that do, the resulting loan modification could be life changing.  The Law Offices of Michael Gaddis has yet to see a final loan modification resulting in one of these trial loan modifications because all of those currently eligible have just started their trial payments.  With that being said, Bank of America has, whether forced or not, finally created a loan modification program that makes sense.

Those interested in viewing the trial modifications with the proposed principal reductions can view them by going to and clicking on the relevant Bank of America files.


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Loan Modification Frequently Asked Questions:

What is a loan modification?  A loan modification is an agreement changing some of the terms of the original note that you received when you obtained your loan.  It is NOT a new loan.  Some of the terms that are frequently changed are interest rate, term, principal balance, amortization rate, etc.  Whatever terms are to be changed or modified are explicitly set forth in the loan modification agreement, all the other terms and conditions of the original note remain the same.

How will the $25 Billion dollar AG settlement affect my chances at obtaining a loan modification?  Although the recent $25 Billion AG Settlement (“Settlement”) does not apply to all lenders and all loans, it should have an effect on those to which it does apply.  The Settlement should allow for changes to the underwriting guidelines which will provide the underwriters with more flexibility and tools, including principal reductions.  I have seen the positive results in this already.  I have seen large principal reductions from Bank of America.  I posted these online so you can review them for yourself by clicking on the Successful Trials and Modifications link on my website.

Are Principal Reductions Real?  In short, yes.  However, it depends on what lender you have and who your underlying investor is.  Some lenders absolutely do not allow for principal reductions while some have been doing so for years.  Ultimately, it depends on who the actual investor on your loan is.  Some of the lenders that I have seen principal reductions from are Chase, OneWest Bank (Indymac), Wachovia, America’s Servicing Company (ASC) and more recently, Bank of America.  Principal reductions are not an entitlement but a tool that investors can use in attempting to modify your loan.  No one should go into a loan modification expecting a principal reduction.

Can I modify my loan if I have equity?  Loan modifications are a loss mitigation tool utilized by investors to mitigate their loss.  Loan modifications are primarily for the benefit of the investor.  When an investor is faced with a loss scenario the investor will analyze all potential avenues of relief in an attempt to determine by which avenue the investor will lose money.  If your house has equity then the investor stands to lose little or no money by foreclosing but stands to lose a significant investment by modifying.  In other words, attempting to modify when you have equity, while not impossible, is extremely difficult.  Most people who attempt to modify with equity get denied for NPV.  The higher that your LTV (the greater the amount you are underwater) is the greater chance you have of obtaining a loan modification as the investor’s risk of loss is higher.

What does it mean when I was denied for NPV?  A denial due to Net Present Value or NPV means that the investor, after analyzing all pertinent information has determined that the investor will lose less money by foreclosing than by modifying.  However, just because you received a NPV denial from your lender does not mean that the NPV is accurate or that the lender processed your loan modification correctly.  I frequently meet with clients that have been denied for NPV, sometimes several times, and found either mistakes in the NPV or omissions that eventually allowed me to obtain a loan modification for the client.  In other words, if you have been denied for NPV, I strongly recommend that you contact me for a review of your situation.

I have already used other attorneys and companies to try and modify, what makes you different?  A large portion of my clients have already tried to modify their loans using loan modification companies, attorneys or non-profit companies.  The reason that I succeed where they fail is because I am not only an attorney, but also a real estate and mortgage broker.  In essence, I speak the same language as the underwriters reviewing your loan modification application and the fact that I am an attorney aides me in getting them to listen to me.  I have been assisting people with loan modifications for over 4 years now.  During that time I have established very strong relationships with the lenders who have come to respect my knowledge and approach in addressing loan modification applications.  I spend a tremendous amount of time attempting to learn the underwriting guidelines at the various lenders and for various investors.  By understanding the rules provided by the investors to the lenders for reviewing loan modification applications I can look at a client’s loan modification application like the bank does which allows me to provide you with insight into your chances at obtaining a loan modification.

I have been told that loan modifications are nearly impossible to obtain and that a short sale is my best option?  Loan modification are real and they are issued by the lenders.  Your odds of obtaining a loan modification yourself or by using an inexperienced or inadequate representative are significantly lower than if you use a person or entity well versed in how loan modifications work.  As I mentioned, most of my clients have been working on their loan modifications for long periods of time or have used 3rd parties to try and modify their loans.  On my website I have posted a large number of actual modifications and trials that I have been able to obtain for my clients.  Look through them and determine for yourself whether loan modifications are for real.  No matter what you do, if you really desire to try and keep your house do not be pushed into a short sale by anyone.  If you determine that a short sale is the best option for you, only do so after you have explored and investigated all of your options.

Can you guarantee that I will receive a loan modification?  I can tell you that I will put my money where my mouth is.  I will not take your case unless I think I have a high probability of succeeding.  I have a money back guarantee.  If you contract me to help you in all 3 phases of the loan modification process and if I am not successful in obtaining a final modification for you I will refund 100% of any money that you have paid for any of the 3 phases.  In other words, if you win, I win.  If you lose, I lose.  Restrictions apply so please read the guarantee form in order to fully understand the parameters.  Therefore, if I take your case it is because I have determined that you are a good candidate and I am willing to take the risk.

I am self-employed and have several sources of difficult to prove income, can I still modify?  My experience has indicated that self-employed people have a more difficult time modifying than W-2 wage earners.  The reason for this is complicated but, to be brief, it is because self-employed people have a more difficult time conveying their financial situation to the lender.  Whatever sources of income that you might have, the lender is looking for the representation of your financial package to look a certain way.  Many self-employed people are denied when they should not be.  It is my job to make sure that your financial situation is properly conveyed to the lender and that any idiosyncrasies are either properly explained or fixed.

I received a previous modification will my lender consider me for another loan modification?  The general answer is yes.  My experience has indicated that most lenders/investors will allow for up to 2 loan modifications during the life of your loan.  However, most lenders require that you have made a minimum number of payments on a previous modification before you will be allowed to be considered for another loan modification.  The number of payments that are required vary from lender to lender but a good general rule of thumb is 12 payments.

Upcoming Seminars

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Foreclosure Prevention Seminar

Call 760-754-2121 for upcoming dates

English:  10:00 a.m. – 12:00 p.m.   Spanish: 1:00 p.m. – 3:00 p.m.

By Michael Gaddis, Esq.

Syllabus of Discussion Topics

1.  Proposed State Attorney General Settlement with Big Banks?  What is it and how does it affect homeowners?

2.  How Does the Foreclosure Process Work?

3.  What is a Short Refinance?

4.  What is a Loan Modification?  What is the Loan Modification Process?

5.  Why Do You Get So Much Mail After a Notice of Default is Filed?  Entities That Assist With Loan Modifications.      

6.  What is HAMP/MHA Plan?  Do all Lenders and Investors Participate in HAMP/MHA/Obama Plan?

7.  Investors Approaching Homeowners About Trying to Buy Their Homes for Market Value and Sell Them Back Via Lease to Own Agreements. 

8.  Hardships and Imminent Default

9.  Principal Reductions:  Fact and Fantasy

10.  What is Net Present Value?

11.  Serviced Loans v. Portfolio Loans

12.  How is Credit Affected by a Loan Modification/Short Sale?

13.  The Value of Forensic Analysis of Loan Documents

14.  Litigation:  Does it Work?

15.  Recourse Loans v. Non-Recourse Loans

16.  1099 Tax Liability for Debt Forgiveness & the Mortgage Debt Relief Act of 2007 (which, as of today, expires December 31, 2012). 

17.  What is HAFA?

18.  Deed in Lieu of Foreclosure

19.  Does Filing a Bankruptcy Help Save Your House?

20.  What can I do with the 2nd loan?

21.  Beware of Foreclosure Rescue Scams

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