On September 27, 2022, Fannie Mae launched a rent payment reporting program to help renters build their credit history. After enrolling in the program, landlords report tenants' on-time rent payments to the credit bureaus through a third-party vendor. This reporting helps establish, maintain, and improve the renters' credit scores.
Fannie Mae is a government-sponsored entity (GSE) that owns and guarantees many mortgage loans in the United States. Fannie Mae doesn't make loans. But mortgage companies, banks, and other lenders originate loans and sell them to Fannie Mae on the secondary mortgage market. Fannie Mae then holds, sells, or repackages the mortgage loans it buys as investments.
Lenders must meet the Fannie Mae guidelines to sell their loans to this GSE. Conventional loans that comply with these guidelines are called "conforming loans." As part of the process of making conforming loans, lenders look at an applicant's credit.
So, why is Fannie Mae trying to give renters a leg up on their credit scores? This program could help homebuyers eventually qualify for mortgage credit. When on-time rent payments are reported to credit bureaus, this reporting assists renters when they apply for a home loan. It can also help them get a better interest rate on a mortgage loan.
On-time rent payments usually aren't included in credit reports. So, they typically don't benefit a consumer's credit score. This lack of reporting puts many renters at a disadvantage when it comes to getting a mortgage to buy a home and qualifying for lower-cost credit, like when buying a car.
When landlords report their tenants' steady, on-time rent payments to the credit bureaus, the renters' credit scores will increase. Rent payment reporting also enables those with thin credit files (little credit) and credit-invisible consumers (people with no credit history) to build a credit history.
Property owners with Fannie Mae-financed multifamily buildings can enroll in the program. The program connects the property owner with a fintech (financial technology) provider.
The landlord then shares their renters' payment data with the provider. The provider directly reports the tenants' positive rent payments to the three major credit reporting bureaus: Equifax, TransUnion, and Experian. This information then goes into the renters' credit profiles.
Only positive information gets reported. Renters who miss a payment are automatically unenrolled from the program, so their credit scores aren't damaged. Renters can also opt out of the program.
Fannie Mae will pay the costs to collect and disseminate rent payment data for one year.
In September 2021, Fannie Mae's underwriting system, called "Desktop Underwriter," started considering an applicant's positive rental payment history when completing credit risk assessments. These assessments establish a home loan's eligibility for sale to Fannie Mae.
For details about Fannie Mae and how it works, go to the Fannie Mae website.
Effective date: September 27, 2022