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Explanation and Sample of Loan Status Report Verbiage
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A sample of a
completed Loan Status Report is available for review. LTV (loan to value) and CLTV (combined loan to value) are mortgage industry acronyms that define loan amounts as a percentage of the sales price of a property. For example, if a client buys a property with one mortgage loan and 5% down, the LTV is 95%. If they put 20% down, the LTV is 80%. Quite simply, it is the loan amount divided by the sales price. This scenario becomes more complicated when two loans are used to purchase a property — a first and a second mortgage. Many people are familiar with 80/10/10, 80/15/5 and 80/20 transactions, although they may not be aware that this is LTV/CLTV terminology. For example: 80/10/10 is an LTV on the first mortgage of 80%, LTV on the second mortgage of 10% and a CLTV of 90%. The first mortgage carries 80% of the price, the second mortgage 10% of the price, for a total financed amount of 90%; hence 90% combined loan to value. 80/15/5 is an LTV on the first mortgage of 80% and an LTV on the second mortgage of 15%, resulting in a CLTV of 95%. 80/20 is an 80% CLTV on the first and a 20% LTV on the second, resulting in a CLTV of 100%. Many borrowers are attempting to use the two loan strategies to eliminate the need for mortgage insurance. As this practice becomes more common, it is necessary for lenders to define the criteria necessary to satisfy both loans. The interest rates, terms of loans, and indices are vastly different on first and second mortgages. The lender should disclose all relevant information on both the first and second mortgage transactions; therefore, they will need to employ the LTV/CLTV portion of the Loan Status Report. Thanks to Kelly Powers of Great Southwest Mortgage for providing this explanation and sample LSR. |
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