What collateral value is used to calculate an LTV ratio for a residential tract development loan?
The value of the real estate collateral for the calculation of the LTV ratio is the “market value” as defined in the agencies’ appraisal regulations. The appraisal should reflect a market value upon completion of construction of the home(s) and the market value of any other collateral, such as lots or undeveloped land. Further, the appraisal must consider an analysis of appropriate deductions and discounts for unsold units, including holding costs, marketing costs, and entrepreneurial profit. For loans to purchase land or existing lots, “value” means the lesser of the actual acquisition cost or the appraised market value.
Related Questions
- How should institutions determine the loan amount to calculate the LTV ratio for a loan to finance a phase of a multi-phase tract development?
- What is the loan amount to be used to calculate the LTV ratio for residential tract development loans?
- When should institutions calculate the LTV ratio for residential tract development loans?
