Published on September 16, 2021
Written by The Servion Group
The change went into effect immediately through a change in DU. While not every mortgage originator was positioned to provide this to borrowers on launch day, the ability to incorporate rental history will become more widely available in the coming weeks.
The Federal Housing Finance Agency’s acting director, Sandra Thompson, said that including rent payments will pave the way for more renters to own homes.
“For many households, rent is the single largest monthly expense. There is absolutely no reason timely payment of monthly housing expenses shouldn’t be included in underwriting calculations,” said Thompson. “With this update, Fannie Mae is taking another step toward understanding how rental payments can more broadly be included in a credit assessment, providing an additional opportunity for renters to achieve the dream of sustainable homeownership.”
The change could have a significant impact in helping more people qualify. In a study of recent unfavorable recommendations from DU, Fannie Mae found that 17 percent of those would have been approved if their rental history been considered.
Taking into account rental history is particularly important for the 20 percent of the U.S. population — disproportionately Black and Hispanic consumers — that have little established credit history.
Lenders will submit the mortgage application through DU, as usual. If DU finds the loan is not eligible for sale to Fannie Mae, the system will now check, for all first-time homebuyers, whether a 12-month history of on-time rental payments would change the outcome. If the loan is not eligible as submitted, but 12 months of on-time rental payments would make the loan eligible, Fannie Mae will notify the lender. The lender can then ask the borrower to give permission for Fannie Mae to access their bank statements.
Assuming the borrower agrees grant access, the lender will order an asset report from a Fannie Mae–approved vendor. The vendor will contact the borrower, who must consent to the vendor accessing the data. The vendor will then access the data and send the data to the lender and DU. DU will automatically assess whether the rental history exists and is consistent with the rental payment amounts on the initial application. If so, the loan will be deemed eligible for sale to Fannie Mae.
Lenders cannot request the bank statements directly. They must order the bank statements through a Fannie Mae–approved vendor.