Something New just came out on Rental History!

By
Real Estate Broker/Owner with Hamm Homes
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. 

Comments (17)

Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Will,

It makes sense does it not?  And like many governmental things, common sense dawns on them much later than sooner!  A

Oct 15, 2021 01:01 PM
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is good information to share with prospective home buyers.

I hope you are feeling much better.

Oct 15, 2021 01:05 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

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.

Oct 15, 2021 01:23 PM
Wanda Kubat-Nerdin - Wanda Can!
Red Rock Real Estate - St. George, UT
So Utah Residential, Referral & Relocation REALTOR

It's fantastic to roll out this great news for potential homebuyers Will. Thank you for sharing and have a wonderful weekend!

Oct 15, 2021 03:08 PM
Mark Don McInnes, Sandpoint-Idaho
Sandpoint Realty LLC - Sandpoint, ID
North Idaho Real Estate - 208-255.6227

Good news for renters looking to purchase.  They are in such a tight spot right now every little advantage helps.  M

Oct 15, 2021 05:13 PM
Brian England
Vacasa - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

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.

Oct 16, 2021 05:46 AM
Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Condo and Home Specialists

Good idea. Why shouldn't renters have this type of record of good payment go towards their credit history...

Oct 16, 2021 07:44 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Will:

Certainly makes sense to me. Wonder why this was not the case before?

Jeff

Oct 16, 2021 01:47 PM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello A, this should of been done a long time ago.

 

Oct 17, 2021 09:35 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

I agree Jeff, this should of happen a long time ago.

 

Oct 17, 2021 09:36 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

hello Roy and thanks for stopping by for this blog!

 

Oct 17, 2021 09:36 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Dorie, This makes sense to me, should of happen a long time ago.

 

Oct 17, 2021 09:37 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Thanks Wanda, this is great news.

 

Oct 17, 2021 09:37 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Mark and thanks for stopping by for this blog!

Oct 17, 2021 09:38 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

hello Brian,  It should of been done a long time ago.

 

Oct 17, 2021 09:39 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Sheila and Larry, this is great news!

 

Oct 17, 2021 09:39 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

That is fantastic news for the renters out there. It's been a long time returning

Oct 17, 2021 04:12 PM