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Fannie Mae Pilot Program Seeks To Help Improve Renters' Credit

Katie Jensen
Sep 27, 2022
improve credit

Renters, including historically underserved groups, will benefit from paying on time each month.

KEY TAKEAWAYS
  • Starting Sept. 27, eligible multifamily property owners can share timely rent payment data through a vendor network to the three major credit bureaus.
  • This is a 'positive-only' initiative — renters who miss a payment are automatically unenrolled to preserve their credit standing.
  • Fannie Mae will cover the costs of collecting and distributing rent payment data for a 12-month period for multifamily borrowers who leverage one of the three approved vendors to collect the data. 

Fannie Mae on Tuesday announced the launch of its Multifamily Positive Rent Payment Reporting pilot program that is intended to help renters build their credit history and improve their credit score.

Starting on Sept. 27, eligible multifamily property owners can share timely rent payment data through a vendor network to the three major credit bureaus for incorporation in the renters’ credit profile. 

For years, researchers have pointed out the lack of credit among generational renters. Fannie Mae said its pilot program is the latest among its efforts to boost equitable access to credit and "remove unnecessary obstacles in consumers' housing journey, whether they choose to rent or own a home."

On-time rent payments are rarely included in credit reports, so they usually do not contribute to a consumer’s credit score. Positive Rent Payment Reporting aims to accelerate the adoption of rent payment reporting by the multifamily industry, and it complements Fannie Mae’s practice of helping lenders incorporate positive rent payments in a single-family mortgage credit evaluation process via Desktop Underwriter.

By incentivizing multifamily borrowers to adopt Positive Rent Payment Reporting, renters will benefit from paying on time each month, including historically underserved groups who disproportionately have lower or no credit scores, Fannie Mae said.

Esusu Financial Inc., Jetty Credit, and Rent Dynamics are approved vendors who will collect the rent-payment data from multifamily property owners and format it for distribution to the credit bureaus.

“Around 20% of the U.S. population has little to no established credit history, a group in which Black and Latino/Hispanic people are disproportionately represented,” said Michele Evans, executive vice president and head of multifamily at Fannie Mae. "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."

Evans continued, "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 long-standing barrier to building credit and help more consumers begin to establish a strong financial and credit foundation.”

Jeffrey Brodsky, vice chairman of Related Companies, a New York based real estate firm, said his company's Related Affordable Housing division "has seen firsthand what on-time reporting can do for our residents to help improve their financial health. We are excited to work with Fannie Mae’s Multifamily Positive Rent Payment pilot and to see programs like these expand to impact even more residents.”

Multifamily property owners can use the pilot program to help their renters. Even better, Fannie Mae noted, this is a "positive-only" initiative. 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 said it will cover the costs of collecting and distributing rent-payment data for a 12-month period for multifamily borrowers who leverage one of the three approved vendors to collect the data. 

“Launching this pilot program is the latest step on Fannie Mae’s journey to make the housing system work better for everyone,” Evans said. “By accelerating the adoption of positive rent reporting across the multifamily industry, we will help ensure renter households get the credit they deserve for paying on time each month. This builds on the positive rent-payment-history enhancement we introduced in the single-family mortgage market last year, which has opened the door to homeownership for many more renters who have aspired to buy.”

Fannie Mae has launched other initiatives and innovations, including several over the past year, to knock down barriers faced by renters and homeowners, including: 

  • Changing the way renters are served by expanding access to quality affordable rental housing in more high-opportunity neighborhoods, including for renters who rely on Housing Choice Vouchers. In April 2022, Fannie Mae introduced Expanded Housing Choice to drive greater acceptance of vouchers in the multifamily market, helping to make the rental housing market more inclusive and equitable.
  • Creating a more inclusive credit eligibility system for people who are denied access to quality, affordable homeownership in a manner that is safe, sustainable, and fair. In September 2021, Fannie Mae enabled single-family mortgage lenders to seamlessly incorporate a history of timely rent payments as an eligibility factor when reviewing borrower applications, helping more first-time homebuyers to responsibly qualify for mortgage credit.
  • Empowering consumers through a program of financial and housing education. In January 2022, Fannie Mae introduced HomeView, a comprehensive and free education resource designed to support consumers at every stage of the homeownership journey.
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