Rental Payment History
In late 2021, the two Government Sponsored Enterprises (GSEs) added the ability for landlords to provide positive rental payment history as a loan consideration. For some reason, negative history will be ignored. The GSEs are Fannie Mae and Freddie Mac. Together, they control about $6 trillion or more in mortgages. Two mortgage gorillas. For example, Freddie Mac provided a brief update with its recent earnings report. Freddie Mac announced its 2021 earnings today (February 10, 2022). Freddie Mac made $12.1 billion in net income. Look at the earnings report filed with the SEC for more information.
What is the status of the rental payment program?
In November, Freddie Mac announced it would encourage landlords to share rental payment data, by recouping a portion of closing costs for properties it finances. In exchange, the landlord would use a platform to report on-time rent payments to the credit bureaus. By year end 73,000 tenant households across 284 properties had been offered the program. As a result of the program, 10,000 people established credit scores or improved their scores by an average of 43 points.
But it may not be enough for those with lower credit scores to qualify for an agency mortgage. According to Freddie Mac’s annual statement, the average credit score for loans it purchased in 2021 was 753. That’s lower than 2020, when they averaged 759.
For comparison, at the end of 2021, borrower credit scores for most new endorsements on Federal Housing Administration loans were in the 640 to 679 range. Unfortunately, sellers ignore offers with FHA financing and pick cash or conventionally financed offers when available. Just 11% of endorsements from October to December 2021 were for loans to borrowers with scores higher than 720. That’s a remarkable difference. At present, FHA and VA programs are boat anchors around the necks of borrowers wanting to use those programs. So rental payment history may not be help in the current market. It’s in its infancy. Time will tell if it adds to default rates or not.
Do Buyers Think It’s a Good Time to Be a Buyer Anyway
Fannie Mae’s surveys indicate how pessimistic buyers are today. Good time to buy a house? Most think not.
