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By Tommy A. Duncan, CMT

Coester Appraisal CEO commissioned by AllRegs to author educational materials

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17 The average FHA loan credit score in 2006 ranged from 665 for an “Excellent” ranked loan, 654 “Good” and 603 for “Fair.” These rankings are a result of post-closing quality control performed on FHA loans. I I I I

Excellent: No errors or a minor error. Good: Minor errors and will sell on the secondary market. Fair: Errors and questions with credit or collateral and may be challenged for a repurchase. Poor: Found fraud in the file.

The average FHA credit score today is “Excellent” 712, “Good” 695, “Fair” 691. As you can see, in less than five years, the difference in the average FHA credit score in 2006 and 2010 is 47 points in the “Excellent” ranking, 41 point in the “Good” ranking and 88 points in a “Fair” ranking. Based on credit scoring, the FHA product is no longer the product of the average mortgage applicant. Borrowers who qualify for FHA loans today have above average credit scores. Because of the overcompensating underwriting criteria, many will not qualify for an FHA loan, such as minorities, young couples and single parents who have a reliable income stream, but have had some hiccups along the way. If the mortgage industry wants to recover, make lending available to the average credit score borrower. Lenders should shoot for a average 688 for an “Excellent,” 674 for a “Good” and a 645 for a “Fair.” This recommendation is still high, but it’s a start in the recovery of the economy. Adjusting the credit score back down will do more for the mortgage and housing industry than any tax credit or stimulus.

Excellent Good Fair Poor

2006 665 654 603 579

2007 663 637 615 567

2008 675 666 638 620

2009 695 687 680 647

2010 712 695 691 706

Tommy A. Duncan, CMT is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 591-2528 or e-mail You may also visit Quality Mortgage Services LLC on the Web at

Sponsored by


Mortgage Builder Software, a provider of loan origination software (LOS) technology, has announced its strategic alliance with Cenlar FSB, a sub-servicer of mortgage loans. Mortgage Builder

For the past eight months, I have been reading how the housing market is collapsing with record lows in sales, loan originations, first-time homebuying markets, and new construction. It all appears to point back to the deal the industry made with the devil when it sold its soul for sub-prime lending. Since the collapses of the market, lenders and investors have tightened their lending criteria in order to strengthen their portfolio as a result of failing loans and repurchase demands. I don’t blame them; however, as a result of overcompensating in tougher underwriting criteria in order to have a stronger creditworthy borrower; the lenders have blocked the traditional Federal Housing Administration (FHA) borrower from qualifying for an FHA loan. For years, FHA has been the loan of choice of first-time homebuyers, middle-income, and moderately-low income applicants. With today’s credit score-driven decision-making, the traditional FHA applicant does not qualify for the FHA loan due to the lender underwriting templates.


Cenlar and Mortgage Builder form LOS servicing partnership

What is really plaguing the FHA housing and real estate markets? 

Coester Appraisal Group, a nationwide appraisal management company (AMC), has announced that its Chief Executive Officer Brian Coester has been commissioned by AllRegs, an information provider for the mortgage lending industry, to create instruction manuals, video tutorials and classroom training programs for lenders. These educational materials will serve to educate lenders on how to protect themselves against repurchase requests based on erroneous assessments of the loan file’s appraisal. According to Coester, discrepancies in appraisals account for roughly 15 percent of all repurchase requests. Once a buyback letter is received, the recipient is under obligation to repurchase the loan in question—often hundreds of thousands of dollars, if not more—unless it can prove that it is not responsible for the discrepancy. Coester, who is an expert at successfully rebutting repurchase requests that are erroneously based on appraisal discrepancies, will be addressing the specific steps that the recipient of a buyback letter can take to determine the validity of the claims, and successfully refute them if inaccurate. “Repurchase requests that are based on faulty or erroneous appraisals are often built on misunderstandings,” said Coester. “But because many lenders don’t know how to appropriately respond to the request, they end up repurchasing the loan, even though they’re not at fault. As with any process, there are certain processes and procedures that greatly enhance a lender’s chance of successfully refuting the request. I’m happy to share my expertise and help lenders to protect themselves from unnecessary penalties.” For more information, visit or

has integrated with Cenlar to provide a seamless process for boarding closed mortgage loans from its LOS system directly to the Cenlar servicing platform. The new association began with both companies’ relationship with the Lenders One Mortgage Cooperative, an alliance of independent mortgage bankers that originates more loans than any non-bank mortgage company in the United States. Lenders One members use Cenlar’s capabilities for customized, privatelabel subservicing on a wide variety of mortgages they originate, giving them numerous financial and competitive advantages by retaining the servicing rights to their loans. Mortgage Builder is a preferred LOS software choice for Lenders One members and the two companies found common ground through the alliance, both enjoying high reputations for the quality of their offerings. “Through this integration with Cenlar, Mortgage Builder users can immediately place loans on the industry-leading sub-servicer’s system, taking virtually all of the human error out of the process,” says Keven Smith, Mortgage Builder’s president and CEO. “It makes a key part of the servicingretained strategy much simpler for lenders of all sizes.” Mortgage Builder’s Smith noted that his firm’s relationship with Cenlar is especially timely, given the increasing industry trend toward process integration all across the mortgage process, from origination to servicing and on to investor delivery. “With the advent of the GSEs’ Uniform Mortgage Data Program (UMDP), digital processes will rapidly become the industry standard,” said Smith. “This partnership between Mortgage Builder and Cenlar FSB positions our clients for early UMDP conformance, reduced costs to originate loans, and a better process for consumers. Our integration with Cenlar helps Lenders One’s independent mortgage bankers compete with even the largest banks in the market,” he says, “and provides yet another among scores of good reasons to become part of that alliance.” For more information, visit or