Credit unions have been found to have the highest loan quality to date in 2010, based results of post-closing quality control audits performed by Quality Mortgage Services LLC, a national compliance solution provider based in Franklin, Tenn. “Nearly 50 percent of credit union loans were rated as ‘Excellent,’ whereas 34 percent of bank loans were ranked “Excellent” and non-bank loans 22 percent in the “Excellent” category,” said Tommy Duncan, executive vice president of Quality Mortgage Services, of the survey findings. These loans were audited for federal regulatory audits, credit and collateral analysis, and mortgage fraud.
Non-banks took the lead in the “Good” ranking, where nearly 61 percent of the loans had minor loan defects, but were still very marketable on the secondary market. Banks ranked at 56 percent and credit unions came in ranked at 43 percent.
For the credit unions to score so well in the “Excellent” ranking, there was a noticeable difference in the credit scores and ratios. The average credit score coming from credit unions in 2010 was found to be 761, where in 2009, the average credit score was 772. Banks averaged a 755 credit score for 2010 and 2009. The non-bank credit score average was 737 for 2010 and 722 for 2009. Credit unions maintained a high credit score average of 761 for loans that ranked “Good” in 2010, while banks and non-banks have an average credit score of 736 and 710, respectively, in the “Good” category.
When analyzing the percentile of pooled loans for purchase on the secondary market, credit unions and banks ran very close at 92.17 percent and 91.13 percent, respectively, of loans with low loan defects. Non-banks had 83.03 percent of mortgage loans with low loan defects, which is the same percentile for 2009.
The credit union average back ratio is another measurement that has been found to set the credit union’s loan quality apart from the other lending institutions. The average back ratio for credit unions in the “Excellent” category is currently 33 percent, where banks have an average of 36 percent and non-banks have a 35 percent average for back ratios. In the “Good” category, credit unions still maintained the lead with an average of 34 percent, banks at 36 percent and non-banks had a 41 percent back ratio average. Credit union borrowers were found to be a financially stronger borrower based on the results of post-closing audits.
Credit unions and bank came in very close in their average for potential repurchases. Credit unions had a 7.09 percent ranking in the “Fair” category where loan defects may warrant a repurchase claim. Banks had a 7.78 percent “Fair” ranking and non-banks had a 14.21 percent loan defect ranking as “Fair” that may provoke a repurchase.
When it comes to fraud-for-housing, credit unions had a 0.75 percent ranking in the “Poor” category, banks had a 1.10 percent ranking and non-banks had a 2.76 percent ranking. This “Poor” category is where fraud-for-housing was discovered during the post-closing audit. The “Poor” category has nothing to do with a loan in default, but is indicative of a ranking where the loan should have never been made.
For more information, visit www.qualitymortgageservices.com.
