[penny.vise@cbsbank.net]

This is sort of long….
The regulation requires DTI and LTV that are used in the credit decision to be reported as data items. There are times when information presented for approval is not updated and the DTI and/or LTV that was approved is not the actual percentages at closing. For example, a proposed loan amount and an estimated value would be used for pricing but the loan amount might change or the value might change yet the loan was approved at the proposed. We believe the intent is to use the actual but are trying to reconcile that with the DTI and LTV “used in making the loan decision.” We do realize the pricing sheet should be updated, however, since the loan may be approved at the proposed, wanted to make sure what is to be reported.
Here are examples of LTV (DTI issues are simply when the proposed loan payment is not updated to the actual loan payment on the Risk Rating/DTI documents if the loan amount changes or something else changes):
1) Loan Amount 80,000. Value 100,000.
In this example the lender approves the loan at 80% LTV. Before the loan closes the loan amount changes to 85,000, but it does not affect pricing. Because pricing is not affected, the pricing sheet is not updated with the correct loan amount. The pricing sheet and the loan approval shows a LTV of 80%, but the actual LTV is 85%. Which should be reported on the LAR?
2) Loan Amount 80,000. Estimated Value 100,000.
In this example the lender calculated the initial pricing using 80% LTV. Before the loan closes the collateral is appraised with an appraised value of 98,000. The lender sends for approval, but fails to update the pricing sheet with the correct LTV and the loan gets approved with the 80% LTV. The pricing sheet and the loan approval shows a LTV of 80%, but the actual LTV is 81.63%. Which should be reported on the LAR?
3) Loan Amount 101,000. Estimated Value 100,000.
a. On VA loans, from our secondary MTG department, the loan amount will include up-front fees. In this example the up-front fees are 1,000. My issue is that with the above example, the actual LTV is 101%. Instead of them calculating the LTV as 101% they calculate the LTV as 100% because they do not include the up-front fees in the LTV calculation. This means that 100% is what was used in making the credit decision. Is it acceptable to report 100% on the LAR even though it differs from the actual LTV of 101%?

Thanks!!!!

[jholzknecht]

Great questions but the regulation and the commentary don’t specify which value you should rely on. The regulation states that you report the value that you relied on in making the credit decision, not the pricing decision. To tighten things up you may want to indicate in the file, when more than one value exists, which value was relied on for making the credit decision.

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