For the CLTV on FHA and VA files, should we submit the CLTV calculated on the total loan amount to bypass the Quality Edit, or should we submit with CLTV calculated on base loan amount?

The question of whether or not to adjust CLTV or report the CLTV used in making the credit decision remains unanswered. This simply means – the decision is yours to make. If you want to avoid the Q617 errors, you should report a CLTV that is based on the total loan amount reported on the LAR. 

The Q617 edit continues to generate questions as there is still quite a bit of industry confusion surrounding the logic behind it. Generally, the issue is related to FHA, VA, and USDA loans.

• FHA, VA, and USDA standards are established for qualification purposes – CLTV is calculated using the “base loan amount” for LTV/CLTV limits.
• The HMDA rule refers to CLTV as “total amount of debt secured by the property to the value of the property” and “CLTV that a financial institution relied on in making the credit decision”.

The Q617 Quality Edit is intended to identify a potential error. If the error is systemic in nature, the reporting entity must make the appropriate correction prior to submission.

If your LOS allows you to establish business rules for populating specific data fields on your HMDA screens, we encourage you to consider creating such rules to manage CLTV.

We continue to monitor this topic closely and expect to make any necessary changes based on clarification or additional guidance from the CFPB.