Freddie Mac says it will consider on-time rent payment as part of the company’s loan purchase decisions in an effort to increase homeownership opportunities for first-time home buyers. Beginning July 10, this automated functionality will be available to mortgage lenders nationwide through Freddie Mac Loan Product Advisor (LPA), the company’s automated underwriting system.
“This extremely important initiative will help many renters move closer to achieving the dream of homeownership,” says Michael DeVito, CEO of Freddie Mac. “Millions of American adults lack a credit score or have limited credit history. By factoring in a borrower’s responsible rent payment history into our automated underwriting system, we can help make home possible for more qualified renters, particularly in underserved communities.”
With the borrower’s permission, lenders and brokers can submit bank account data for LPA to identify 12 months of on-time rent payments for inclusion in the tool’s assessment of purchase eligibility. The bank account data is obtained from designated third-party service providers using the same automated process used to verify assets, income, and employment through LPA asset and income modeler (AIM), according to Freddie Mac. Eligible rent payment data includes check, electronic transactions, or digital payments made through Zelle, Venmo, or PayPal.
Additional requirements for submitting rent payment data to LPA will be announced in an upcoming bulletin, according to Freddie Mac. Initial designated service providers supporting Freddie Mac’s automated rent payment capability include Blend, Finicity, FormFree, and PointServ.
“One of the first steps to purchasing a home is a positive credit history, and Freddie Mac is committed to helping consumers achieve that goal,” says Mike Hutchins, Freddie Mac president. “Our enterprise-wide approach already includes programs to help consumers understand credit and initiatives to assist renters with building and improving their credit scores. Factoring on-time rent payments into our automated underwriting system will help create even more opportunity for families across the nation.”
Freddie Mace announced an initiative last year to help renters build credit by encouraging operators of Freddie Mac-financed multifamily properties securing its loans to report on-time rental payments to the three major credit-reporting bureaus. The company says 70,000 households across more than 816 multifamily properties have been enrolled since the initiative was rolled out, with more than 15,000 new credit scores established. Two-thirds of renters with an existing credit score saw their scores increase, according to Freddie Mac. The company’s CreditSmart financial capability curriculum helps consumers learn about the importance of building, maintaining, and using credit.
