CHARLOTTE AMALIE, St. Thomas, U.S. Virgin Islands – September 14, 2023 -- Virgin Islands Economic Development Authority (VIEDA) officials announced today that the VIEDA is increasing its combined loan-to-value (CLTV) ratio and debt-to-income ratio (DTI) requirements for the VI Slice Moderate-Income Homeownership Program (“VI Slice”). The adjustments in these requirements were designed to meet the needs of a larger cross-section of the population to be referred for the VI Slice program and stimulate economic growth through increased lending activities for individuals and families to own a home in the U.S. Virgin Islands.
Effective immediately,
- the maximum CLTV ratio is increased from 95 percent to 105 percent, and the
- DTI ratio is increased from 31 percent to 36 percent.
These requirements were modified after the Economic Development Bank (EDB), an entity of VIEDA, received inquiries and concerns from the Territory’s mortgage lenders about the VI Slice CLTV and DTI ratio requirements.
“The lenders alerted us that the initial ratios for the VI Slice program restricted how much financing they could give to their clients,” stated Wayne L. Biggs, Jr., chief executive officer of the VIEDA, regarding the reason for these revisions to the program. “It was also not in line with the requirements to pursue FHA loans. Therefore, the decision was made to revise the CLTV and DTI ratios for the VI Slice program to reflect industry standards. Hopefully, more residents will be able to take advantage of the program,” added VIEDA CEO Biggs, Jr.
The CLTV ratio is determined by adding the balances of how much a mortgage applicant is borrowing and dividing it by how much the property the applicant wants to buy is worth, or its current market value. It is a calculation used by mortgage and lending professionals to determine the total percentage of a homeowner's property that is encumbered by a lien. For example, a property with a first mortgage balance of $300,000 plus a second mortgage balance of $100,000 divided by a property value of $500,000 has a CLTV ratio of 80 percent, meaning 80 percent of the property is at risk for default on the loan [1].
The debt-to-income ratio (DTI), expressed as a percentage, is the portion of a mortgage applicant’s gross (pre-tax) monthly income spent on repaying regularly occurring debts, including mortgage payments, rents, outstanding credit card balances and other loans. It's a comparison of what's going out each month vs what's coming in [2]. According to Consumer Financial Protection Bureau, this number is one way lenders measure a mortgage applicant’s ability to manage their monthly payments to repay the money they plan to borrow.
Lenders use the CLTV ratio along with other calculations, such as the debt-to-income ratio and the standard loan to value (LTV) ratio, to assess the risk of extending a loan to a borrower.
The EDB encourages lenders, with a fully executed VI Slice Memorandum of Agreement with the VIEDA, to revisit cases under the previous CLTV and DTI requirements that were not submitted for review by the EDB and to submit them to the VIEDA/EDB for consideration.
As of October 2022, the VIEDA, in partnership with the Office of the Governor and the Office of Disaster Recovery, administers the VI Slice program in the USVI.
To find out more about VI Slice adjustments, send an email to vislice@usvieda.org. To learn more about the VI Slice Moderate-Income Homeownership Program, visit www.vislice.com.