The Federal Housing Finance Agency’s announcement that Fannie Mae will consider rental payment history in mortgage approval decisions is a significant innovation and a major step forward in expanding homeownership opportunities. In addition to expanding the pool of qualified borrowers, it enhances the safety of the mortgages by fully considering the most relevant predictor of mortgage risk: housing payment history.
This new procedure will utilize information already available to lenders without adding any burden to homebuyers. By analyzing bank statements that have already been submitted, Fannie Mae’s Desktop Underwriter automated underwriting system will be able to confirm that past rent payments were made on time. When Fannie Mae tested the system on past applicants that were not approved, 17% would have qualified using the new policy. This will have a material impact on mortgage applicants who are qualified but have been left out of homeownership.
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