B2-1.1-02: Combined Loan-to-Value (CLTV) Ratios (02/23/2016)

Owned by Marsha Freeman
Last updated: Nov 16, 2018 by Kacey Olson (Unlicensed)
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© Fannie Mae Single Family Selling Guide

Calculation of the CLTV Ratio

For first mortgage loans that are subject to subordinate financing, the lender must calculate the LTV ratio and the CLTV ratio. (For first mortgage loans that are subject to a HELOC, see B2-1.1-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios.)

The CLTV ratio is determined by dividing the sum of the items listed below by the lesser of the sales price or the appraised value of the property.

  • the original loan amount of the first mortgage,

  • the drawn portion (outstanding principal balance) of a HELOC, and

  • the unpaid principal balance of all closed-end subordinate financing. (With a closed-end loan, a borrower draws down all funds on day one and may not make any payment plan changes or access any paid-down principal once the loan is closed.)

Note: For each subordinate liability, in order for the lender to accurately calculate the CLTV ratio for eligibility and underwriting purposes, the lender must determine the drawn portion of all HELOCs, if applicable, and the unpaid principal balance for all closed-end subordinate financing. If any subordinate financing is not shown on 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 after the underwriting decision has been made, up to and concurrent with closing, the lender must re-underwrite the mortgage loan. (See B3-6-02, Debt-to-Income Ratios, for additional information.)

Note: The CLTV ratio calculation may differ for certain mortgage loans. For details on these differences, see 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; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; B5-3.3-01, HomeStyle Energy for Energy Improvements on Existing Properties; B5-5.1-02, Community Seconds Loan Eligibility; B5-5.1-04, Community Land Trusts; and B5-5.3-03, Loans with Resale Restrictions: Underwriting and Collateral Considerations.

Refer to the Eligibility Matrix for allowable CLTV ratios.

Loan-Level Price Adjustments

An LLPA applies to certain mortgages with subordinate financing. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.