Calculation of NPV loss in case of (internal) refinancing

Which NPV loss should be taken in order to calculate the NPV loss if the 1% threshold is breached and the forborne loan contract should be placed in default?

A client contacts the institution for a loan restructuring of his retail mortgage loan as his repayment capacity has declined. This restructuring is granted via a (internal) refinancing of the mortgage loan with a prolongment of the duration and at current market interest rate (which is in line with the interest rates granted under normal circumstances and taking into account the prolonged duration of the loan). The new interest rate of the refinanced loan contract is hereby lower than the interest rate of the original loan contract, but this is due to the market evolution of the interest rate levels.  In the current interest rate environment, a forbearance granted via a refinancing of the loan contract at current interest rates gives rise to a NPV loss. However the majority of this NPV loss is related to the new interest rate pricing of the loan. In the granting of this refinancing, normal acceptance and loan pricing procedures are followed.    For the calculation of the NPV loss for the 1% threshold, two options are possible:  A/ calculate the total NPV loss (= for the new market interest rate and the prolongment)  B/ calculate the NPV loss for the concession only (= in this case the prolongment of the duration).