© Fannie Mae Single Family Selling Guide
Calculation of the HCLTV Ratio
For first mortgages that have subordinate financing under a HELOC, the lender must calculate the calculate the HCLTV ratio. This is determined by dividing the sum of the items listed below by the lesser of lesser of the sales price or appraised value of the property.
the original loan amount of the first mortgage,
the full amount of any HELOCs (whether or not funds have been drawn), and
the unpaid principal balance (UPB) of all closed-end subordinate financing.
Note: For each subordinate liability, in order for the lender to accurately calculate the HCLTV the HCLTV ratio for eligibility and underwriting purposes, the lender must determine the maximum the maximum credit line for all HELOCs, if applicable, and the unpaid principal balance for balance for all closed-end subordinate financing. If any subordinate financing is not shown on a credit a credit report, the lender must obtain documentation from the borrower or creditor.
If the borrower discloses, or the lender discovers, new (or increased) subordinate financing subordinate financing after the underwriting decision has been made, up to and concurrent with
closing, the lender must re-underwrite the mortgage loan. (See B3See B3-6-02, Debt-to-Income RatiosIncome Ratios, for additional information.)
Permanently Modified HELOCs
If the lender determines the HELOC has been permanently modified and the outstanding UPB is less is less than the permanently modified HELOC, the lender must use the modified HELOC amount in amount in calculating the HCLTV ratio for eligibility purposes and for delivery. The lender must obtain appropriate obtain appropriate documentation that the HELOC has been permanently modified and include this documentation this documentation in the loan file.
If the outstanding UPB is greater than the permanently modified HELOC, the lender must use the use the outstanding UPB to calculate the HCLTV ratio for eligibility purposes and for delivery. As noted As noted above, the lender must obtain appropriate documentation and include that documentation in documentation in the loan file.
In no case may the CLTV ratio exceed the HCLTV ratio.
Note: The HCLTV ratio calculation may differ for certain mortgage loans. For details For details on these differences, see B2see B2-1.2-05, Payoff of Installment Land Contract Requirements; B5-2-03, Manufactured Housing Underwriting Requirements; B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions; B5-3.3-01, HomeStyle Energy for Energy Improvements on Existing Properties; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; and B5-5.1-02, Community Seconds Loan Eligibility.
Note: Refer to the Eligibility Matrix for maximum allowable HCLTV ratios.