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LTV and DTI Rounding Down

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  • #5812
    Mary Frances
    Participant

    Our loan policy states for owner occupied 1-4 family 90%LTV is the maximum. We have researched FDIC Part 365 and we cannot determine if the LTV is between 90.01 to 90.49 if we can round down and not carry as a LTV exception. Is this Compliant to round down and are there any Safety and Soundness issues?

    Also, our Policy for DTI states “should not exceed 42%”. Can DTI be treated the same as LTV above for Compliance and Safety and Soundness?

    #5817
    rcooper
    Keymaster

    I would take the conservative approach and interpret it literally as 90% is the max, unless your policy specifies otherwise.

    Here’s a link to the Fannie Mae guidelines on LTV rounding – they aren’t regulation, but their guidelines/requirements often serve as examples.
    https://www.fanniemae.com/content/guide/selling/b2/1.1/01.html

    #5819
    jholzknecht
    Keymaster

    Robin’s advice is solid.

    Your questions indicate a syndrome I refer to as “dancing on the edge.” Some also refer to this as taking calculated risks. I pretty consistently drive a little faster than the posted speed limit. I try to keep my speed within a range that I deem to safe enough to avoid a ticket. It usually works. I don’t get tickets often and I am willing to pay an occasional ticket to fulfill my “need for speed.”

    When regulators find you dancing on the edge they may or may not cite a violation, but over time they form an opinion that your program is reckless, just barely in compliance and occasionally just barely out of compliance. If you can live with an occasional violation and a downgraded management rating in order to continue dancing on the edge, go for it.

    If you want to avoid the occasional violation and restore your management rating set your LTV at 89% so you are unquestionably in compliance. Even a small miscalculation won’t send you tumbling over the edge, because you are dancing a safe distance away from the edge.

    #5820
    Mary Frances
    Participant

    Thank you for your responses. We currently do not round down on LTV or DTI but we had a officer ask about rounding down on DTI so then the discussion began…..

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