Freddie Mac’s latest action is geared toward increasing homeownership opportunities for first-time homebuyers by considering on-time rent payments as part of the GSE’s loan purchase decisions. Beginning July 10, 2022, this automated functionality will be available to mortgage lenders nationwide through Freddie Mac Loan Product Advisor (LPA).
“This extremely important initiative will help many renters move closer to achieving the dream of homeownership,” said 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.”
The offering allows lenders and brokers to submit bank account data for LPA (with permission of the borrower) 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). Eligible rent payment data includes check, electronic transactions or digital payments made through services including Zelle, Venmo, or PayPal.
“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,” said 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.”
The new initiative is the latest measure by the GSE to assist renters in taking a step closer to achieving the dream of homeownership. Last year, the GSE announced a resource 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.
Since Freddie Mac began the initiative, the GSE reports that 70,000 households across more than 816 multifamily properties have been enrolled. The result, more than 15,000 new credit scores have been established, and 67% of renters with an existing credit score have witnessed their scores rise.
Freddie Mac has also established its CreditSmart curriculum to assist consumers in learning the importance of building, maintaining, and utilizing credit to control their own financial future. The GSE reports that through the curriculum, five million-plus consumers have benefitted from CreditSmart’s free financial education.
Freddie Mac announced that additional requirements for submitting rent-payment data to LPA will be announced in an upcoming July Single-Family Seller/Servicer Guide Bulletin. Initial designated service providers supporting the GSE’s automated rent payment capability include Blend; Finicity, a Mastercard Company; FormFree; and PointServ.