On certain commercial loans, the credit decision will be made "subject to " an appraisal for the subject property with the loan to value not to exceed "X".

We are going around in circles trying to determine what we are to report for the LTV and Property Value, since the appraisal did not exist at the time of approval.

I am of the mindset to report the LTV as the value "X", since this is the magic number the credit decision is based on. However, with no value determined until prior to closing, am I incorrect in my logic? Should the LTV be based on the appraised value once established? And once the appraisal comes in, is that the property value to report, or would we put NA since no value had yet been determined at the time the credit decision was made.

Any thoughts on this matter would be appreciated.

You're making a condition approval without the appraisal. HMDA is only interested in the final approval. You need to report there LTV and Property Value because you can't make a final decision until the appraisal (and all the verifications) are in.

To help you understand this, read the scenarios about Approved Not Accepted in Appendix B of the Small Entity Compliance Guide and read the definitions of "Customary Commitment or Closing Conditions" [Commentary to §1003.4(a)(8)(i) #13(ii)] and "Underwriting or Creditworthiness Conditions" [Commentary to §1003.4(a)(8)(i) #13(iii)].

We struggled with this as well. It is somewhat difficult because commercial credit does not always find it necessary to document any LTV in the file. If a $100,000 loan requires 80% LTV and the appraisal comes back at $223,143, I don't think anyone is actually calculating an LTV. They just look at the appraisal and say, "Yep, under 80%." We've been calculating it on the back-end based on the appraisal. It seemed our best option, as we did rely on it and that's what it actually is.

This concept was difficult for us too. As long as the appraisal came in at required value (80% of loan) or higher the condition was cleared but there was no final LTV for decision. We have the doc. processor document the final LTV on the closing checklist based on the appraised value and final loan amount.

Thank you all for your help. It makes sense on using the back end figures based on a "conditional approval" approach.