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The little metric that could have major impact on your business

Tedious, time-consuming workloads, managing customer relationships, you already have a lot on your plate as a lender. When you’re busy, crossing every t and dotting every i can get unintentionally glossed over. You focus on the tasks at hand and move on one thing at a time. Anything else may seem less important than what’s right in front of you. It happens. But there is one little metric that if overlooked could have big consequences: the compare ratio. And having a myopic outlook toward it could negatively impact your business.

In this blog, we’re tackling why you need to look at your FHA investors and their metric on performance to make sure you’re selling to the right investor, like TMS Correspondent. We’ll talk about the importance of understanding compare ratio, the consequences if you’re working with the wrong investor on your government FHA loans and why that could mean you not only run the risk of compliance failures, but also run the risk of FHA disciplinary actions.

And because TMS is always transparent, we’re sharing our numbers vs. the entire FHA market so you can see how we not only talk the talk but walk the walk. Let’s dive in.

Compare Ratio

Every lender that participates in FHA loans has a compare ratio. A compare ratio is what HUD, who runs the FHA program, uses to keep track of all of their lender’s default percentages, and then compare all percentages to find the average, also known as compare ratio. HUD takes the FHA loans you did in the last 1-2 years and tracks how many of those were seriously delinquent. Seriously delinquent refers to loans that were reported as 90 days or more delinquent by the servicing lender.

Here’s an example: You’re a lender with 5% delinquency. FHA looks at that overall making the average 5% which means your compare ratio is 100—you’re at 100% average. If you’re at 10% delinquency and the industry is at 5%, you’re double the average, so your compare ratio is 200.

Anything above 150% is a red flag with HUD. They’ll contact lenders above 150% and potentially take disciplinary action such as being placed on a watch list.

Lenders with compare ratios at or above 200% may be subject to a 6-month termination of their origination authority in the geographic region in which their compare ratio exceeds 200%.

There’s a lot of risk and detrimental consequences when you’re not working with the right investor.

Not all investors are created equal

With TMS Correspondent, it’s not just seeing the compare ratio, it’s understanding it that is crucial. When we talk about crossing every t and dotting every i, this is what we mean. We not only know what the compare ratio is, we understand, implicitly, how it can affect your business and how important it is to keep these numbers in line. Not all investors are created equal—we are an investor who talks the talk, and we also have the numbers to back it.

TMS’ numbers for both Vintage and FICO vs. the entire FHA market were significantly lower which makes us twice as efficient at keeping delinquencies low and twice as proficient at servicing government FHA loans, including yours.


FICO TMS’ FICO Performance* Entire FHA Market
580-619 7.09% 9.11%
620-659 4.50% 6.88%
660-719 1.90% 3.84%
720-850 0.62% 1.66%


*December 2022

Why is compare ratio a big deal?

If you’re still wondering why this little metric is a big deal, read on. When looking to get a warehouse line, the first thing banks are going to look at is your compare ratio. If your compare ratio is running high, banks will decline doing business with you due to risk. This is another alarm that may signal HUD to take disciplinary action(s) and can have major consequences on your business.

TMS Correspondent can help

In today’s mortgage market, a lender’s ability to competently manage performance that’s measured through compare ratio is imperative to succeed. Looking at your investor and their servicing strengths and performance and understanding the compare ratio could mean the difference between a thriving business and one in major trouble.

If you’re a lender who originates FHA loans, you need to align yourself with investors that have rock-solid servicing operations, like TMS. If you sell your loans to TMS Correspondent, TMS would service the loan. And when it comes to our loan servicing performance, we let our numbers do the talking and they say we’re twice as good—which means we’re twice as good at going above and beyond to ensure your business flourishes.

In alignment with being an investor with strong servicing operations for your FHA loans, we’re a team of CAREspondents who can help your business thrive with other benefits like:

  • Close more loans with our agency style direct credit box and full suite of renovation products
  • Get loans off your books in as little as 1 day. Average 5-6 calendar days
  • Industry’s fastest 24-hr closed loan review guarantee
  • Leverage builder business with our extended lock program up to 180 days
  • Now offering delegated AUS Jumbo product
  • TMS’ award-winning servicing portal, SIME (Servicing Intelligence Made Easy), giving you 100% full transparency, 365/24/7 on-demand portfolio views

TMS Correspondent is an investor who understands trends, regulations, and ever-evolving requirements from HUD for FHA loans. We do this so you can retain your customers, grow your business, and stay ahead of the competition. We know that for your business to prosper, you need an investor that goes above and beyond. Those characteristics are just some of the ways we’ve become a Top 15 Ginnie Mae issuer.

At TMS, everything revolves around a single mission: Grow Happiness. That includes keeping delinquencies down while keeping your revenue up. We grow happiness for our customers by leveraging our 20 years of experience to help you prosper.

Partner with TMS today and let us show you how we Grow Happiness for you and your customers.

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May 4, 2022