Fannie Mae Launches Rent Payment Reporting Program
Written By: Joel Palmer, Op-Ed Writer
Fannie Mae recently launched a pilot program aimed at helping renters build their credit history and improve their credit scores.
With the firm’s Multifamily Positive Rent Payment Reporting program, eligible multifamily property owners can share timely rent payment data through a vendor network to the three major credit bureaus for incorporation in the renter's credit profile.
Fannie noted in its launch announcement that rent payments are rarely included in credit reports. Therefore, people who have rented for years and made their payments on time don’t benefit from that discipline when they go to take out their first mortgage.
Given the effects of inflation, escalating home prices and rising mortgage rates, many current renters may be waiting even longer before they venture into homeownership.
Fannie also noted that this program complements its s existing practice of helping lenders incorporate positive rent payments in the single-family mortgage credit evaluation process via Desktop Underwriter. That practice started just over a year ago.
"Around 20 percent of the U.S. population has little to no established credit history, a group in which Black and Latino/Hispanic people are disproportionately represented. Of the consumers who do have a credit score, a disproportionate number of Black consumers have a subprime credit score. These imbalances reinforce racial disparities in access to credit and quality affordable housing among renters and homeowners," said Michele Evans, Executive Vice President and Head of Multifamily, Fannie Mae.
"The absence of sufficient credit history reduces a renter's ability to access housing in higher-opportunity neighborhoods, obtain a mortgage, and attain lower-cost credit, such as auto loans and education financing. By enabling easier and more expansive adoption of positive rent payment reporting, we can knock down this longstanding barrier to building credit and help more consumers begin to establish a strong financial and credit foundation.”
Renters who miss a payment are automatically unenrolled to preserve their credit standing, and renters may opt out of the program if they prefer. Fannie Mae will cover the costs of collecting and disseminating rent payment data for a 12-month period for multifamily borrowers who leverage one of the three approved vendors to collect the data.
Freddie Mac has also implemented both of these types of programs to assist renters in building credit. In July 2022, the company announced that it will consider on-time rent payments as part of its mortgage loan purchase decisions through its Loan Product Advisor (LPA) automated underwriting system. With the borrower’s permission, lenders and brokers can submit bank account data for LPA to identify 12 months of on-time rent payments to assess purchase eligibility.
Last year, Freddie launched an initiative to help renters build credit by encouraging operators of its financed multifamily properties to report on-time rental payments to the three major credit-reporting bureaus.
Credit reporting to help tenants build credit profiles and enable better access to financial services was a key part of the Equitable Housing Finance Plans mandated and released earlier this year by the Federal Housing Finance Agency.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
