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The Federal Housing Finance Agency announced that Fannie Mae will now allow lenders to factor in a borrower’s rental payment history during the mortgage underwriting process, a move that could qualify more potential buyers for a home loan. The FHFA’s addition of rental payments could help borrowers with limited credit histories access home loans more easily.
Credit reports usually don’t include rent payments to residences because most landlords don’t report such data to credit reporting firms. Credit scores of renters, therefore, don’t usually reflect their timely payments.
But "for many households, rent is the single largest monthly expense,” said Sandra L. Thompson, acting director of the FHFA. “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."
Fannie Mae will begin factoring in rental payment history starting Sept. 18. It will use an asset verification technology provider to identify records that have consistent rental payments over the last year.
“Expanding credit opportunities for home buyers through alternative data is a top priority of the National Association of REALTORS®," said NAR President Charlie Oppler. "Fannie Mae’s adoption of rent data for underwriting is crucial as rents closely track mortgage payments. Furthermore, Fannie Mae has the reach to touch most consumers and as an industry leader, other lenders will follow suit.”