Automated Underwriting System to Incorporate Consistent Rent Payment History in Credit Evaluations, Responsibly Expanding Consumers’ Access to Mortgage Credit. The new update to DU is a positive change for eligibility – only consistent rent payments will be considered to improve eligibility. Any records of missed or inconsistent rent payments identified in the bank statement data will not negatively affect the applicant’s ability to qualify for a loan sold to Fannie Mae. Rent payments that appear in the payment history of the borrower’s bank account data can be identified, whether made via check or electronically, such as via a company’s payment portal or other digital payment solution.
Credit history is a key element in evaluating a borrower’s ability to make a mortgage payment, but fewer than 5% of renters today have their rent payments reported on their credit bureau report, putting many prospective first-time homebuyers at a disadvantage. Approximately 20% of the U.S. population overall has little established credit history – a group in which Black and Hispanic consumers are disproportionately represented. Additionally, Fannie Mae’s National Housing Survey® found that Black consumers identify insufficient credit score or credit history as their single biggest obstacle to getting a mortgage and do so at a much higher rate compared to white consumers (29% to 18%).
According to Fannie Mae research, lenders factoring in first-time homebuyers’ history of consistent rent payments is one significant difference between applicants qualifying and not qualifying for a mortgage. In a recent sample of mortgage applicants who had not owned a home in the past three years and did not receive a favorable recommendation through Desktop Underwriter, 17% could have received an Approve/Eligible recommendation if their rental payment history had been considered.
Good news for expansion of sustainable homeownership opportunities for underserved markets and consumers.