Using Fannie Mae’s ratio definitions, a purchase has a $400,000 qualifying property value and a $300,000 original first-mortgage amount. The only subordinate financing is a HELOC with a $60,000 limit and $20,000 drawn. What are the CLTV and HCLTV ratios?
Correct Answer
B) CLTV is 80% on the $20,000 drawn and HCLTV is 90% on the limit
B. CLTV is 80%; HCLTV is 90%. CLTV uses the drawn HELOC balance: ($300,000 + $20,000) ÷ $400,000 × 100 = 80%. HCLTV uses the full HELOC limit: ($300,000 + $60,000) ÷ $400,000 × 100 = 90%. Scope and exceptions: No other subordinate debt is assumed. These definitions do not by themselves establish the loan’s eligibility limit. Source: Calculation of the CLTV Ratio — https://guide-selling.fanniemae.com/sel/b2-1.2-02/combined-loan-value-cltv-ratios Calculation of the HCLTV Ratio — https://selling-guide.fanniemae.com/sel/b2-1.2-03/home-equity-combined-loan-value-hcltv-ratios
Why This Is the Correct Answer
B. CLTV is 80%; HCLTV is 90%. CLTV uses the drawn HELOC balance: ($300,000 + $20,000) ÷ $400,000 × 100 = 80%. HCLTV uses the full HELOC limit: ($300,000 + $60,000) ÷ $400,000 × 100 = 90%. Scope and exceptions: No other subordinate debt is assumed. These definitions do not by themselves establish the loan’s eligibility limit.
Why the Other Options Are Wrong
Option A: Both are 90%, because an equity line is measured at its full limit
It uses the full limit for both ratios.
Option C: Both are 80%, as an equity line is measured at the drawn sum
It ignores undrawn availability in HCLTV.
Option D: CLTV is 90% on the $60,000 limit and HCLTV is 80% on the drawn sum
It reverses the two definitions.
Exam Tip
CLTV: drawn HELOC amount. HCLTV: full HELOC limit.
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