Credit unions originated high-quality mortgages in 2010 in QMS survey
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.