The new functionality will be available beginning July 10
Freddie Mac has announced that it will now consider on-time rate payments as part of its loan purchase decisions in an effort to increase homeowner opportunities for first-time buyers.
“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.”
This new functionality will be available on Freddie Mac’s automated underwriting system, Loan Product Advisor (LPA). Beginning July 10, mortgage lenders and brokers will be able to submit bank account data for LPA to identify one year of on-time rent payments for inclusion in the tool’s assessment of purchase eligibility. According to a statement from the company, this data is obtained from designated third-party service providers through the same automated process used for verifying assets, income, and employment.
“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, president of Freddie Mac. “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 Mac had previously launched an initiative to help renters build credit by encouraging operators of multifamily properties to report on-time rental payments to major credit-reporting bureaus. Since then, 70,000 households from more than 816 multifamily properties have been enrolled and over 15,000 new credit scores have been established. According to a statement from the company, 67% of renters with an existing credit score saw their scores increase.
