Fannie Mae to Include Rental History |
Fannie Mae recently announced they are going to start including rental payments in their credit evaluation process. This will be a new feature added to their Desktop Underwriter (DU). The information will be taken from the consumer's bank statements and input into their system and it will recognize all consistent on-time payments. Fannie Mae's CEO, Hugh Frater, states that "Many renters believe they will never be able to buy their own home because of insufficient credit history. We can responsibly expand mortgage eligibility by including positive rent payment history in the underwriting credit risk assessment," he further added, "we believe this will be the first time any large-scale automated mortgage underwriting system will leverage electronic bank statement data to consider positive rent payment history. It is but one important step in covering the housing inequalities of the past, creating a more inclusive mortgage credit evaluation process going forward and encouraging the housing system to develop more ways of safely assessing and determining mortgage eligibility in order to fairly serve potential homeowners." This will indeed open a lot of doors for potential homeowners who before could not quality due to a lack of credit history. It is estimated that this would boost DU approvals by up to 20%. This new feature could be the make-or-break factor for many otherwise unqualified buyers. To clear up some confusion, this is not something that will be factored into the borrower's credit scores. This is strictly a feature within the DU system, but it is not something that will impact credit scores. There are options to have a borrower's rent and other alternative credit become part of the actual credit report. And while the addition of these may have some impact on newer scoring models, they will not impact the mortgage scoring models that Fannie and Freddie accept. What Fannie Mae is doing is a very positive change to their underwriting system but it does not in any way affect the credit scores. In an FHFA press release Director Sandra Thompson said "There is absolutely no reason timely payments of monthly housing expenses shouldn't be included in underwriting calculations. With this update, Fannie Mae is taking another step toward understanding how rental payments can more broadly be included in a credit assessment, providing an additional opportunity for renters to achieve the dream of sustainable homeownership." Even though this does not affect credit scores, it is definitely a huge benefit for so many consumers who have a limited credit file but a good record of rental payment history. |
Will,
It makes sense does it not? And like many governmental things, common sense dawns on them much later than sooner! A
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Will Hamm
Aurora, CO
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Roy Kelley
Gaithersburg, MD
This is good information to share with prospective home buyers.
I hope you are feeling much better.
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Will Hamm
Aurora, CO
Good afternoon Will Hamm ,
Wow amazing what some common sense will do! Only makes sense that consistent on-time payments should count in the credit evaluation process.
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Will Hamm
Aurora, CO
It's fantastic to roll out this great news for potential homebuyers Will. Thank you for sharing and have a wonderful weekend!
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Will Hamm
Aurora, CO
Good news for renters looking to purchase. They are in such a tight spot right now every little advantage helps. M
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Will Hamm
Aurora, CO
I think that is fair and wonder why it wasn't always a factor. Rent is usually higher than what a mortgage payment will be so if there is proof that someone has been consistently paying a higher amount, it should provide some proof that the prospective buyer can afford the payment.
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Will Hamm
Aurora, CO
Good idea. Why shouldn't renters have this type of record of good payment go towards their credit history...
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Will Hamm
Aurora, CO
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Lawrence "Larry" & She...
Plainview, NY
Hi Will:
Certainly makes sense to me. Wonder why this was not the case before?
Jeff
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Will Hamm
Aurora, CO
That is fantastic news for the renters out there. It's been a long time returning
Comments(17)