Pilot Extended, Lending Caps Lowered

Columnist Lew Sichelman on Fannie Mae's positive rent payment pilot program and the multifamily loan ceiling.

Lew Sichelman

Lew Sichelman

Most tenants pay their rent on time. Moreover, most would like to see their on-time payments recognized in their financial records.

A recent Fannie Mae survey found that four out of every five renters would like their promptness factored into their credit scores. For that reason, Fannie Mae has decided to keep in place its pilot program of reporting on-time payments to the three credit repositories for all of 2024.

At the same time, Fannie Mae’s regulator has again lowered the multifamily loan purchase caps for both Fannie and Freddie Mac to $70 billion each, resulting in a total of $140 billion in the 2024 calendar year.

The decreasing multifamily loan ceiling

This is the second consecutive year that the multifamily loan ceiling has been cut down. In 2022, it was $78 billion; In 2023, it was $75 billion. According to the The Federal Housing Finance Agency (FHFA), these lower levels are appropriate considering current market conditions.

The agency said that it will monitor the market and increase the ceilings if necessary. However, it won’t reduce them any further should the market be any smaller than initially projected.

The FHFA will continue to require that at least half of the government sponsored enterprises’ multifamily lending will be mission driven affordable housing. The caps ensure that Fannie and Freddie support liquidity in the multifamily sector, especially the affordable and underserved portions, without crowding out private capital.

To promote preservation projects, loans classified as supporting workforce housing are exempt from the ceilings.

Rental payment reporting

Nancy Atwell, multifamily chief operating officer & senior vice president at Fannie Mae, said in prepared remarks that the positive rent payment program not only helps renters improve their credit ratings but also shows positive results for property owners and operators by reducing tenant turnover and lowering the cost of evictions.

Since the pilot was launched in September, more than 100 owners have enrolled, at no cost, some 2,170 properties financed by Fannie Mae. Together, these properties total some 435,000 units, according to Atwell.

Three vendors–Esusu, Jetty and Entrata–work with owners to report on-time payments of tenants who opt into the program to credit bureaus. Renters who miss a payment are automatically unenrolled. Fannie Mae covers the cost of collecting and reporting rent payment data for a year.

To gauge the effectiveness of the program, the government-sponsored enterprise polled a representative sample of renters. It found that 87 percent of respondents believe that having a good credit score is important and that 82 percent who always pay on time would expect to see an immediate bump in their scores should their rental histories be reported.

Moreover, 79 percent realize that having a higher score equates to great financial opportunity and 78 percent agreed their scores would be more consistent if their rent payments were reported.

Extending the pilot supports Fannie Mae’s objective of accelerating the adoption of rental payment reporting industry-wide, Atwell said. Credit scores that reflect such reporting are an important part of a renter’s ability to obtain quality rental housing, automobile loans, credit cards, student loans and mortgages.

So far, according to Atwell, almost 58 percent of the 240,000 or so tenants who are participating in the program have seen their scores increase. Those who already had a score when they signed up have seen their scores jump by an average of 40 points, though the company noted that some of that improvement may have been the result of factors beyond their rental histories.

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