How Positive Rent Reporting Advances Borrowers’ and Renters’ Goals
Positive rent reporting, a new piece of Fannie Mae’s mission-driven lending agenda, is a leap forward for the U.S. rental housing market amid an ongoing affordability crisis. This initiative, recently launched in a pilot program in Chicago, has significant upside potential for not only tenants but landlords, owners, and multifamily borrowers as well.
What is Positive Rent Reporting?
It is a program that facilitates the submission of records of on-time monthly rent payments to credit bureaus for consideration in their credit scores. Fannie Mae’s pilot program automatically reports tenants’ largest monthly expense to the credit bureaus, enabling them to build credit histories and improve their scores over time.
The more widespread use of rent reporting comes at a time when approximately 45 million U.S. adults have little to no established credit history, a limiting factor in access to quality housing. Until recently, paying the rent on time did not typically count towards a tenant’s credit score.
How Multifamily Investors Benefit from Fannie Mae’s Pilot Program
While it might seem like renters have the most to gain, positive rent reporting has several advantages for multifamily investors, such as attracting and retaining tenants.
- 67% of renters prefer a unit with rent reporting over one without it.
- 73% of renters are more likely to make on-time rent payments if these transactions were to be reported.
- On average, rent reporting increases a tenant’s lease duration by six months, stabilizing income streams and reducing turnover.
Borrowers can enroll in this new program at no initial cost, through participating lenders. One year of positive rent reporting services will be reimbursed by Fannie Mae.
Rent Reporting Offers Tenants Greater Opportunities
Like the program’s name suggests, the primary benefit for renters is that it will automate the reporting of on-time rent payments to the three major credit bureaus. The program opens doors to previously unavailable opportunities, like higher-quality housing and more favorable interest rates on loans, by empowering tenants to work towards building stronger credit scores.
Additionally, participants are not in jeopardy of lowering their credit scores because late or missed payments will not be counted against renters in the program.
How Positive Rent Reporting Works
Fannie Mae has partnered with three fintech vendors that provide the capability to report positive rent payments directly and automatically to the three major credit bureaus. To participate, a borrower must agree to share anonymized data with Fannie Mae and the vendor of their choice, make a 12-month commitment and pledge not to pass off the cost of rent reporting to their tenants.
Contact Arbor to Learn More
For more than a decade, Arbor has been a Top 10 Fannie Mae DUS® Multifamily Lender. In December, Arbor co-funded one of the largest Fannie Mae Structured Adjustable-Rate Mortgage loans of 2022 to support the acquisition of a portfolio of thousands of multifamily units on Chicago’s South and West sides, which will join Fannie Mae’s Multifamily Positive Rent Payment Reporting pilot program.
If you would like to learn more about Fannie Mae multifamily loan products and the options available to borrowers, contact us today.
Interested in the multifamily real estate investment market? Contact Arbor today to learn about our array of multifamily and single-family rental financing options and view our other market research and multifamily posts in our research section.