What denial reason would you use in a case where a borrower has applied for a mortgage but their LTV exceeds the max due to their credit score?

If LTV is too high, then I'd say "inadeqate collateral." If credit score is too low, then I'd use one the applicable Credit Score reason, check box 2 and provide the details. If debt to income is too high, than I'd say "Excessive Obligations" or "Insufficient Income." Maybe I don't understand the question?

DTI and credit score are both ok, but our max LTV is tiered based on Credit score. For example, customers with a score of 720 and above may borrow up to 95% on a no cash out loan, and customers with a score lower than 720 may borrow up to 90%. This particular borrower had a score below 720 but wanted to borrow 93%. We countered to 90% and they did not accept the counter offer, so we need to decline the loan. Our LO's have been using "value or type of collateral is not sufficient" but this does not seem right to me.

The value of their collateral has nothing to do with the denial reason. You have to give them the reasons that caused their score to fall below your 720 cutoff score for a 95% LTV.

I sort of agree with Value of collateral not sufficient. This loan request was for no cash out, so I am guessing it was to perhaps refinance the balance owed on a car loan. The value of the vehicle was not high enough to provide the required LTV based on their credit score. If the vehicle was worth more, they could have qualified.

I was sort of leaning towards what you were saying, Dan. @ comply, this is for a mortgage loan. I believe that "value or typee of collateral is not sufficient" should be used only when an appraisal has been completed and the actual value or condition of the property was not satisfactory.

For no cash out would have to be a refi, they would have wanted to borrow the amount to pay off the balance - would not have been concerned about 10-20% down payment. Then when the credit was analyzed and the LTV ended up being 93% and the credit scores didn't allow for that - I think it would still be denied based on value. When it was analyzed and the LTV just happened to be 85% there would have been no problem. If the home was valued at more the loan could have been made. Guess it is sort of point of view.

Complylady, I would agree if the value of the property did not support the amount of money being applied for. However in this case it is specifically noted the reason they do not qualify for a 93% loan is based solely on their credit score and not the value of the property therefore the value of the property is not playing a roll in the adverse action and would not be an appropriate adverse action reason.

I agree with Dan...the score is the source of the problem. A higher ltv is being required solely due to the credit score. Therefore the reasons affecting the score are key.

Ok, I am bringing this thread to life again. We have a loan where customer applied for a purchase with a 95* LTV. Credit and DTI are ok, but credit score falls below our cutoff for a 5% DP. We countered to approve the loan with a 10% DP. They did not accept the counter. Loan is denied. We should deny based on the factor(s) contributing to the lower score. That being said, when I pick my HMDA reason for denial, is it ok to use "insufficient cash" instead of "credit history"?

For HMDA you should use both if both contributed to the denial.


When using an "arbitrary" score when the applicant qualifies in every other way is sometimes difficult to defend.

From the Commentary to 1002.9(b):

Disclosing the key factors that adversely affected the consumer's credit score does not satisfy the ECOA requirement to disclose specific reasons for denying or taking other adverse action on an application or extension of credit.

You have to be a bit more specific in your reasons than the generic terms used by the CBRs for the factors.

BTW, if one of the reasons is o/s balances in relation to credit limits (or however that term is worded) and you do not have an allowable (acceptable) percentage in the loan policy, that reason would not be valid because you have no set ratio defined.