I am running into a situation where the loan is approved with a certain loan amount and property value which is what the CLTV is calculated with; however, the loan amount will sometimes change (higher or lower) or the property value will come in different (higher or lower) but the approval is not updated to reflect these changes. So in the LAR, we report the final loan amount and final property value, but the CLTV reported in the LAR is still based on the outdated information. Do we report the incorrect CLTV since that was used in making the credit decision even though it doesn't agree with the other information being reported?

For example: In my approval, the loan amount is $100,000 and a tax card property value is $200,000 so my initial CLTV is 50%; however, the borrower requested the loan amount to be increased to $125,000 and the appraisal came in at $175,000 so my new CLTV is 71%. The approval doesn't need updated because it is within allowable tolerances. Which CLTV should I report on the LAR?

You have a very strange underwriting process. If the loan is approved for $100,000 and it goes to $125,000, how is your ATR supported? As far as property value, I have never seen loan approvals happen before a formal property evaluation or appraisal is performed. If you mean a contingent approval based on a minimum value, your CLTV is still going to be based on your accepted evaluation or appraisal value after final review, is it not?

You do have a strange UW process. Approval without property value is odd, as is a 20% tolerance for change in CLTV.

To your question, however, you should report the actual CLTV on the loan based on the loan amount and appraisal.

Seemed odd to me too, but as long as the LTV doesn't exceed 75%, from the original loan presentation, then they don't require a 'new' or modified approval. I think the interpretation of the guidance is what is causing the push back by our quality control team in loan operations. The guidance says report the CLTV that was used in the credit decision, which they are 'technically' doing when they report 50%, but I'm getting quality edits saying the calculation isn't valid because the final loan amount and property values are not being used in the calculation, so I want to correct the CLTV to 71% to resolve the edit and ensure the reported values in the LAR and ultimately the HMDA Disclosures are accurate. My thoughts are if agencies/advocacy groups are analyzing our data that results may be misleading or it may appear our data is not reliable for use. I just want to make sure that I should in fact be chaning this from CLTV that was used in the credit decision to the final and more accurate CLTV.

Consider why you get the appraisal and what would happen if the appraisal were different enough from the tax card value to result in denying the application on collateral value after that initial positive credit decision. You are not really making the final credit decision using that preliminary valuation because you either ratify the decision or change it later when the appraisal is done. Put another way, the initial approval is contingent upon an acceptable appraisal value.

Question on this old thread: How are banks documenting "final" approval after the appraisal is received and reviewed? Our loan presentation is "approved" prior to the appraisal. (i.e. initial approval is contingent upon an acceptable appraisal value) If the collateral value would be insufficient, we would review the credit decision. If the appraisal is acceptable, we don't go back and add a final approval date.

During a compliance audit we have a "comment" that the final approval date is not documented.

What is the best way to document the "final approval" date?

I have staff document it on the credit memorandum. We now have a spot for it.