Fannie Mae to integrate consumer rent payments into mortgage appraisal process
According to research by Fannie Mae, lenders taking into account the history of constant rent payments of first-time buyers are a significant difference between eligible and ineligible mortgage applicants. In a recent sample of mortgage applicants who had not owned a home in the past three years and had not received a favorable recommendation from Fannie Mae’s Desktop Underwriter (DU), 17% could have received a recommendation approved / eligible if their rental payment history had been considered.
As a result, Fannie Mae announced that the company will launch a new feature in its automated underwriting system to integrate consumer rent payments into the mortgage credit assessment process. Starting September 18, the DU will allow single-family lenders – with permission from mortgage applicants – to automatically identify recurring rent payments in the applicant’s bank statement data to provide a more comprehensive credit assessment.
“Many tenants think they will never be able to buy their own home because of insufficient credit. We can responsibly extend mortgage eligibility by including a positive rent payment history in underwriting risk assessments, ”said Hugh R. Frater, CEO of Fannie Mae, in a press release. “We believe this will be the first time that a large-scale automated mortgage underwriting system will leverage data from electronic bank statements to account for the positive history of rent payments. This is just an important step in correcting housing inequalities of the past, creating a more inclusive mortgage credit assessment process in the future, and encouraging the housing system to develop new ways of assessing and determining secure mortgage eligibility in order to fairly serve all potential homeowners. . “
Credit history is a key component in assessing a borrower’s ability to make a mortgage payment, but less than 5% of renters today have their rent payments reported on their credit report, says the society. For qualified tenants who may have a limited credit history but a strong rental payment history, improving Fannie Mae’s DU creates new homeownership opportunities.
Only consistent rent payments will be considered to improve eligibility. Any record of missed or inconsistent rent payments identified in the bank statement data will not adversely affect the applicant’s ability to qualify for a loan sold to Fannie Mae. Rent payments that appear in the payment history of the borrower’s bank account data can be identified whether made by check or electronically.
“US Bank is committed to investing in home equity, and enabling us to expand sustainable homeownership opportunities for underserved markets and consumers by considering historical rent payments is a significant and welcome change, ”adds Tom Wind, executive vice president, consumer loans, US Bank. “We support Fannie Mae’s efforts and are excited to deploy this impactful feature. “