The Q617 edit has been generating a lot questions as there is still quite a bit of industry confusion surrounding the logic behind it. Most frequently it is seen in FHA loans. Based on feedback from the CFPB and various LOS partners, here is what we know:
- FHA standards are established for qualification purposes – CLTV is calculated using the “base loan amount” for LTV/CLTV limits.
- HMDA requires the CLTV to be calculated using the “total amount securing the debt”.
- 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.
In the past there has been some ambiguity regarding how the CFPB intends to calculate the Q617 ‘comparison LTV’, specifically around decimal accuracy. The CFPB has recently confirmed with QuestSoft that they will calculate the LTV to the same number of decimal places as the CLTV reported in the LAR file. For example, if the CLTV for a given loan is reported as 95, the CFPB will calculate the LTV as a whole number. Alternatively, if the CLTV is reported as 95.123, the CFPB will calculate the LTV to three decimal places. This logic will be incorporated into the Q617 calculation and included in our next quarterly release.
We continue to monitor this topic closely and expect to continue making minor adjustments to the logic around Q617 throughout the year as we learn more from the CFPB.