Let's Suppose That a Lender Has Established a 90 Percent

Multiple Choice

Let's suppose that a lender has established a 90 percent loan-to-value ratio cutoff as one of its primary underwriting criteria. If a borrower is willing to make a down payment of $125,000 on a home recently appraised at $550,000, which of the following best describes the lender's decision on whether or not to approve the loan along this dimension?

A) The lender approves the loan because the LTV ratio is less than 90 percent
B) The lender denies the loan because the LTV ratio is less than 90 percent
C) The lender approves the loan because the LTV ratio is greater than 90 percent
D) The lender denies the loan because the LTV ratio is greater than 90 percent