Credit unions are originating the highest quality mortgage loans so far this year, according to survey results released Wednesday by Quality Mortgage Services. According to the data, nearly 50% of loans originated by credit unions were rated "excellent," meaning their loans had few to no defects. QMS is a mortgage quality control services firm based in Franklin, Tenn. The survey results were pulled from a sample of the loans the company receives from its clients for audit. QMS took 10% of the loan production volume each month of 2010. The loans were audited for federal regulatory compliance, credit and collateral analysis and mortgage fraud. Thirty-four percent of loans originated by banks were ranked "excellent" in the survey as well as 22% of non-bank loans. A non-bank lending institution is a mortgage lender that is not regulated by the Federal Deposit Insurance Corp., the Office of the Comptroller or the Currency or the Office of Thrift Supervision. Non-banks lead the "good" category on the survey, 61% of loans had only minor defects and were still very marketable to secondary investors. Fifty-six percent of banks loans were rated "good," as were 43% of credit union loans. Loans ranked in the "fair" category were evaluated on a basis of repurchase risk. Results showed 7% of credit union loans, 8% of banks loans and 14% of non-bank loans were viable for repurchase. A "poor" ranking, according to the survey, constitutes a loan that should have never been approved or originated. Only 0.75% of credit union loans were ranked poor by the QMS survey, alongside 1.1% of bank loans and 2.8% of non-bank loans. The average credit score for an "excellent" loan originated by a credit union in 2010 was 761, down from 772 in 2009, while the average for a bank originated loan remained the same as a year ago at 755. The average credit score for an "excellent" non-bank originated loan was 737, up from 722 in 2009. Another important element QMS used in evaluating a loan's rating is the average back ratio. The average back ratio is defined as the total expense for a home against the income and other liabilities associated with a borrower. A lower ratio signifies a strong ability to pay. The average back ratio for credit unions was 33% in the "excellent" category and 34% in the "good" category. For banks, it was 34% and 36%, respectively. And non-banks rounded out both categories at 35% and 41% average back ratios, respectively. Write to Christine Ricciardi.