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Supervisory LTV Limits Reporting

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Question: 
What are the reporting requirements for loans exceeding the Supervisory Loan to Value limits relative to the recent decline in real estate market values? Does a bank need to report a loan as a loan to value exception based upon the following scenarios? <ol><li>Loan to value was originally conforming at origination of loan; however, at renewal a new appraisal or evaluation reports a lower value which causes the LTV to be in excess of the Supervisory limits. Should the loan now be report as an exception or should loans only be reported if they are an exception at origination?<li>If during the term of a loan a new appraisal or evaluation is received that reports a lower value that would result in a LTV exception, should the loan be reported as an exception to the Supervisory limits?</ol>
Answer: 

The bank's real estate lending policy should deal with these situations as covered in the Supervisory Limits rules. There are exceptions for certain situations, such as workouts, renewals/refinancing without new funds and a number of other situations.

The limits themselves deal with the initial underwriting of a loan (or renewal/refi with new money). A bank should certainly track and pay attention to the drop in collateral value of its collateral, but don't mix that with reporting of value at time of underwriting; that would make it appear that the bank had granted credit under these values.

First published on BankersOnline.com 9/21/09

First published on 09/21/2009

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