Fannie Mae has launched a pilot program to help renters build their credit histories and improve their credit scores. The Multifamily Positive Rent Payment Reporting pilot will allow eligible multifamily property owners to share rent payment data through a vendor network to the three major credit bureaus.
This is the latest step in the government-sponsored enterprise’s efforts to bolster equitable access to credit and remove obstacles for those who choose to rent or aspire to be a homeowner.
“What’s surprising to me is for years and years one of the biggest expenses for consumers is the rental payment. When you look at on-time payments by renters, they are rarely included in credit histories and put many renters at a disadvantage,” says Michele Evans, executive vice president and head of multifamily at Fannie Mae. “This is an opportunity to make a difference.”
The pilot aims to accelerate the adoption of rent payment reporting by the multifamily industry, and it also complements Fannie Mae’s existing practice of helping lenders incorporate positive rent payments into the single-family mortgage credit evaluation process. By incentivizing Fannie Mae Multifamily borrowers to adopt the reporting, residents who pay on time each month will benefit. The pilot also is a positive-only initiative; renters can choose to opt out, or those who miss a payment are automatically unenrolled to preserve their credit standings.
Esusu Financial, Jetty Credit, and Rent Dynamics are the approved vendors for collecting the rent payment data and disseminating the information to the credit bureaus. The GSE will cover the costs of the collection and dissemination of the rent payment data for a 12-month period for those borrowers who leverage one of the three approved vendors.
Evans says approximately 15% of people in the nation have no credit history, with a disproportionate number of historically underserved groups like Black and Latino/Hispanic consumers having subprime credit scores.
“This is a way we can start to chip away at that number,” she says. “We can really change renters’ lives. Whether it’s their ability to move into a higher-opportunity neighborhood or another rental community, this will give renters the power to do that. If you can improve someone’s credit score and they get financing to buy a car, start a small business, or get an educational loan, you can lower the cost of that loan to the renter. And in the spirit of homeownership, as they build their credit scores, they could be eligible one day to own a home, if that’s their choice.”
She adds that the pilot makes it easy for borrowers to embrace rent payment reporting as part of their competitive amenities. Plus, it motivates renters to pay on time, which ultimately results in a reduction in delinquencies and a potential increase in net operating incomes.
Samir Goel and Wemimo Abbey, co-founders and co-CEOs of Esusu, say their firm shares a common goal with Fannie Mae of bolstering diverse, successful, and equitable communities.
“Today, there are still systemic barriers to access for millions of people looking to create a pathway to financial stability,” they say. “Working with Fannie Mae enables Esusu to create opportunity pathways for those who have historically been deemed credit invisible while also laying the foundation to access other financial instruments that contribute to generational wealth-building opportunities that come from good credit.”
In addition, Jetty announced the launch of Jetty Credit as part of the Fannie Mae pilot.
“The majority of renters are getting zero lift in their credit score for paying their biggest monthly expense, and Jetty Credit has been designed to fix that,” says Mike Rudoy, co-founder and CEO of Jetty. “Jetty Credit fits perfectly into our broader suite of financial tools designed to help renters, and we couldn’t be more proud to launch it with Fannie Mae, a company who shares in our mission.”