Freddie Mac recently announced that, beginning July 10, 2022, on-time rental payments will be included in its underwriting system. This should make it possible for more underserved groups to qualify for mortgages.
With the borrower’s permission, mortgage lenders can submit a borrower’s bank account data that shows 12 months of on-time rent payments to Freddie Mac’s automated underwriting system, LPA. Eligible rent payment data includes check, electronic transactions, or digital payments made through Zelle, Venmo, or PayPal.
“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.”
With rising mortgage rates, Freddie Mac has been exploring ways to create more opportunities for first-time homebuyers to make the leap toward homeownership and deliver a better borrower experience. Last year, Freddie Mac rolled out an initiative 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.
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