The FHFA released their annual scorecard for Fannie and Freddie outlining the priorities for the GSEs: increase housing affordability and equity.
One of the goals FHFA emphasized is finishing the validation and approval of credit score models and moving to implement those changes. Changing credit score models has been a long time coming but it will play a key role if we're ever going to expand homeownership among underserved consumers.
On that front, the inclusion of positive rental history in calculating a consumer's credit score is low-hanging fruit, and a likely component of new models. Freddie Mac is already incentivizing multifamily providers to report on-time rental payments to credit bureaus by giving them closing cost credits on multifamily loans. Previously, landlords would only report missed rental payments.
"Rent payments are often the single largest monthly line item in a family's budget but paying your rent on time does not show up in a credit report like a mortgage payment," said Michael DeVito, CEO of Freddie Mac. "That puts the 44 million households who rent at a significant disadvantage when they seek financing for a home, a car or even an education."
Indeed, less than 5% of renters have rent payments reflected on their credit report and that hits particularly hard for Black and Hispanic consumers who may have little established credit history. According to Fannie Mae's national housing survey, 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.
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