The FHFAannounced today that on-time rental payments will now be part of Fannie Mae's underwriting calculations, while missed rental payments won't keep borrowers from getting a mortgage. It's a move that will hugely benefit somewould-be homebuyers who have been shut out of the opportunity because of a thin credit file.
Sandra Thompson, FHFA's active director, said: "For many households, rent is the single largest monthly expense. There is absolutely no reason timely payment 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."
Promoting sustainable homeownership is a key part of theGSEs' mission, and including rental payment history as part of the credit file is low-hanging fruit to boosting that goal. Consider the Fannie Mae research which shows that:
Fewer than 5% of renters have rent payments reflected in their credit report.
29% of Black consumers say insufficient credit score or credit history is the biggest obstacle to getting a mortgage, compared with 18% of white consumers.
In a study of recent unfavorable recommendations from its desktop underwriting system, Fannie Mae found that 17% of those would have been approved, had their rental history been considered.
Including rental payment history in the credit history where it's a positive for homebuyers is a great example of the FHFA putting its money where its mouth is on increasing minority homeownership. It also bypasses the difficulties of getting legislation through a contentious Congress without using an executive order: a win-win for homebuyers and the mortgage industry serving them.
Today's HousingWire Daily continues Houses in Motion, a miniseries looking at U.S. real estate. In this episode, Senior Real Estate Reporter Matthew Blake is joined by Kenny Cravens, vice president of training sales at Coldwell Banker Legacy Real Estate Group in Bowling Green, Kentucky, and president of the Southern Kentucky Association of Realtors.
The FHFA today said that positive rental payment history will be taken into account in Fannie Mae's underwriting decisions — and there is no penalty for missed rental payments.
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The Consumer Financial Protection Bureau (CFPB) is fulfilling its promise to scrutinize mortgage servicers, and some servicers are riding the forbearance exit wave better than others.
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