Fannie Mae pilot reimburses landlords for on-time renter payment data

Fannie Mae is deploying a program to encourage multifamily owners to share renters' on-time payment data, in a bid to build credit among prospective homebuyers.

The government-sponsored enterprise's Multifamily Positive Rent Payment Reporting pilot will reimburse multifamily owners' cost of collecting renters' payment data for a 12-month period through any of three approved vendors, it said Tuesday. The initiative follows the GSEs' earlier efforts to incorporate positive rent data into their underwriting, and a similar program rolled out last November by Freddie Mac.

Fannie Mae's latest pilot is an effort to create more homeownership opportunities for historically underserved groups, including the around 20% of the nation's population with little to no credit history, it said. The GSE wants to accelerate the adoption of rent payment reporting across the industry, and Fannie Mae is in a unique position to drive that change, said Michele Evans, head of multifamily at Fannie Mae. 

"By incentivizing borrowers to do this, we're hoping that it becomes much more of a norm than not, and that this is the way it gets done going forward," she told National Mortgage News. 

The GSE doesn't have an estimate as to how many multifamily owners and tenants could benefit from the pilot, but officials suggested hundreds of thousands of renters could be eligible. Fannie Mae last year provided liquidity for approximately 694,000 units of multifamily housing, with 95% affordable at or below 120% of the Area Median Income, according to an official. In the past five years, the total number of such units is approximately 3.7 million.

The initiative includes three approved vendors to gather information for the credit bureaus: Jetty's Credit program, Rent Dynamics and Esusu Financial, the fintech that partnered with Freddie Mac's effort last year. Each vendor also provides additional, unique services for renters and owners that won't be covered by the pilot, such as flexible rent payment loan products. 

Each vendor will determine eligible multifamily properties, which are active loans with five or more years to reach maturity, according to a Fannie Mae general guidance. The pilot will only record positive rent payment information, automatically un-enrolling renters who miss a payment. Renters can also choose to opt out of the program altogether, the GSE said.

Fannie Mae last September began factoring rent payment history into its Desktop Underwriter, while Freddie Mac in July began accepting 12 months of on-time rental payments for its Loan Product Advisor technology. 

The Federal Housing Administration Tuesday also announced it will begin to allow a first-time homebuyer's prior 12 months of positive rental payment history in its Technology Open to Approved Lenders Mortgage Scorecard in determining FHA loan eligibility. 

"If you're regularly paying your rent on time, that's a good indication you will also pay your mortgage on time," said Federal Housing Commissioner Julia Gordon in a press release. "We hope that adding this positive factor to all of the characteristics currently considered in an FHA credit evaluation will increase access to affordable FHA-insured mortgages for first-time homebuyers."

The agency's new policy, which will be in place for first-time homebuyer purchase originations beginning Oct. 30, defines on-time payments as paid within the month the rent is due. Lenders who want to incorporate the data will have to obtain verification of a borrower's on-time payments from a landlord and indicate it within the TOTAL Mortgage Scorecard.

Initiatives to incorporate prospective borrowers' rent payment data into their credit scores have gained steam in the past year, including efforts by entities outside of the GSEs. Experian recently began to test a feed of rent data into FICO Score 8, while multifamily lender Berkadia also announced a partnership with Esusu. Nuveen Real Estate last week also partnered with Esusu to provide the rent payment reporting at no cost to residents in the firm's affordable housing portfolio.