We have a file where the loan-to-value exceeded guidelines on December 1st. The Mortgage Officer was told this information on that date. Now, the Mortgage Officer wants to redisclose to add a credit and reduce the loan amount to the correct guidelines. Would we be out of compliance due to the timing if we included the loan amount being lowered with the credit?

Is this a portfolio loan? I don't understand what is the big deal. Just track it and report it to the board until in pays down to the SLTV level - if the bank is willing to refund the difference, I can't imagine this status will last very long. There is no violation here.

No, this particular file is to be sold. After researching further, the appraisal came in lower causing the LTV to exceed guidelines.

Then the only source for what you can do that will be acceptable is from the investor to which you are selling the loan. Most likely they are not going to touch it and you will have a portfolio loan.

That was my thought as well. Thank you for the input! BTW Happiest of Birthdays!

You have a valid changed circumstance with the appraisal coming in lower.
The application no longer meets the criteria for the product applied for, correct?
So you can counter-offer with a loan at the lower amount.
Once the borrower accepts, you redisclose.
This should make it work for the investor.
At least it has on the occasions this situation has occurred here.

We have a similar situation - but not sure that it rises to the level of a counteroffer as Truffle Royale indicates above. We had an appraisal come in lower than expected but the only change was to increase the rate and add a discount point. The loan amount stayed the same. The appraisal came in about 3 weeks ago but was not reviewed until this week and that is when the MLO wants to change the pricing of the loan. We would then need to have the discount point be lender paid because our COC LE is going out way after the changed circumstance (the lower appraised value). Is that right? No way to turn this into a counteroffer so we can reissue the revised LE?

Why was the appraisal sat on for three weeks before being reviewed? IMHO you are way past your allotted time for disclosing a changed circumstance and any additional fees associated with the appraisal will be subject to the applicable tolerances.

Tarhe, this is an issue I have had to fight at nearly every institution that I've been at...appraisals have to be reviewed and any fee changes handled within 3 days of receiving the appraisal. The ops people frequently "don't have time" and think the clock starts when an appraisal is "approved" or "accepted" or some such thing, but when that appraisal arrives at the institution the clock starts, so usually I have had to work with them to revise the process to ensure appraisals get an appropriate response when received so that the re-disclosure window isn't missed as you appear to have in this situation.

And I'm just going to assume the rate had been locked prior to this event? But I'm not sure why a rate would be locked if value can drive the numbers, so I'm asking. Because if it's not been locked, then those changes won't happen until it is locked, will they?

Well, the real question is locked with whom?? The borrower? and if so, I assume the written rate lock agreement indicates the lock is void if the property value does not support a XX% LYV