We had a borrower apply through blend which is our online system that we use. The borrower was applying for a cash out refinance to receive cash out and only applied for $50,000. In looking at the loan application the borrower had a prior lien amount over $100,000 and the loan amount was changed to $140,000 by the loan officer. The 1003 initial loan application has a loan amount of $140,000 not $50,000 and our 1008 transmittal summary shows the loan amount as $140,000 and the CLTV was calculated using $140,000/$175,000 = 80%. We use Encompass software for our mortgage loans and when the loan was denied it changed the loan amount back to $50,000 which is what the borrower originally applied for online and that is what uploaded to the HMDA LAR. I did find another post on here where it was recommended to report the last loan amount that was requested if the borrower applied for the wrong loan amount. Would you agree that this would apply to this situation as well? I am thinking it would. Any help with this would be greatly appreciated. Thanks.

Here is the thread that I found with this information: https://www.bankersonline.com/forum/ubbthreads.php/topics/2200358/loan-amount-for-denied-loan

The borrower applied for $50,000. What the MLO changed it to without the applicant requesting the change is irrelevant.

Ok thanks Dan. Unfortunately, we have no source document showing the borrower applied for $50,000 other than our audit trail. The system that we use changes the loan amount on the application when the loan amount is changed so that is why I am asking this question. I guess we will have to capture the audit trail for verification purposes as nothing else in the file matches up to the $50,000. So can we report the CLTV that was calculated using the $140,000 since that is what they denied the loan at and is on the statement of denial? Thanks for getting back to me.

Official Interpretation
Paragraph 4(a)(24)
1. General. Except for purchased covered loans and partially exempt transactions under § 1003.3(d), § 1003.4(a)(24) requires a financial institution to report, the ratio of the total amount of debt secured by the property to the value of the property (combined loan-to-value ratio) relied on in making the credit decision. For example, if a financial institution calculated a combined loan-to-value ratio twice—once according to the financial institution's own requirements and once according to the requirements of a secondary market investor—and the financial institution relied on the combined loan-to-value ratio calculated according to the secondary market investor's requirements in making the credit decision, § 1003.4(a)(24) requires the financial institution to report the combined loan-to-value ratio calculated according to the requirements of the secondary market investor.

Curious what the reason for denial was if the LTV was 80%. How are you going to reconcile that with reporting what the borrower actually applied for?

This is the type of situation that causes me to have strongly worded 'never assume anything' conversations with LOs.

TR - I'm not sure I understand your question but if the borrower applied for $50,000 and if there is a $100,000 outstanding lien then their CLTV would be based on $150,000 of debt to be securing the loan. I'm not sure where the $140,000 came from.

The system that we use changes the loan amount on the application when the loan amount is changed

If the applicant applied for $50,000 and the loan closes at $150,000 then $50,000 is still the amount applied for. The system, or the MLO should not be changing the amount applied for on the application unless that amount is specifically modified at the applicant's request and that request should be fully documented in the file.

The only time the amount applied for on the application comes into play is reporting the covered loan amount for non-originated loans such as denials, withdrawals, unaccepted counteroffers. For all others your report the covered loan amount per the regulatory guidelines regardless of the loan amount shown on the application.

Thanks, Dan. But even $150k/$175k is only 85% LTV.

If you change the loan amount in your LOS, then of course everything in the file is going to update to reflect the change. Without documentation that the request came from the applicant, the system should be changed back for a denial/withdrawal.

I would expect the LO had a conversation with the borrower about the loan amount since it was changed to $140,000. However, I have no way of confirming that. I don't see where it is documented in the file. The 1008 transmittal is showing loan amount is 140,000 and so does the 1003 loan application. Property value is $175,000 which makes the CLTV 80% using $140,000. Prior lien amount is around $109,000. Loan was denied due to credit (collections delinquent credit obligations) based on the statement of denial. Based on the limited information in the file the borrower was just applying for the cash out amount they were looking for $50,000 and did not consider the prior lien amount on the same property. Borrower was trying to refinance with cash out. Thanks.

Without any evidence that the customer requested a change to the loan amount, I would report $50,000. Using the numbers just provided, the CLTV should be reported at 159,000/175,000, or 90.86.I would also question why collateral value wasn't an additional reason for denial.

Needless to say, but I will say it anyway, you need to get your LOs to document any change like this thoroughly in the file as someday, it is really going to come back and bite you. Lazy LOs can be directly related to the difference between an honest mistake in reporting and CMPs.

Thank you everyone for the information.