Addition of positive rental payment history in TOTAL Mortgage Scorecard assessment criteria supports greater opportunity for first-time homebuyers to qualify for affordable FHA-insured mortgage financing.
The Federal Housing Administration (FHA) is announcing today that it will begin to permit inclusion of a first-time homebuyer’s positive rental payment history as an additional factor in the credit assessment performed in the Technology Open to Approved Lenders (TOTAL) Mortgage Scorecard to determine eligibility for an FHA-insured mortgage. By adding a positive rental history indicator to the Scorecard, FHA’s credit evaluation will become more comprehensive and equitable, with the goal of enabling additional first-time homebuyers to qualify for affordable FHA-insured mortgage financing.
“If you’re regularly paying your rent on time, that’s a good indication you will also pay your mortgage on time,” said Federal Housing Commissioner Julia Gordon. “We hope that adding this positive factor to all of the characteristics currently considered in an FHA credit evaluation will increase access to affordable FHA-insured mortgages for first-time homebuyers.”
In its new policy, FHA considers positive rental payment history as the on-time payment of all rental payments in the previous 12 months. To utilize this added factor for their borrowers, lenders originating forward purchase mortgages for FHA insurance will be required to obtain verification of the borrower’s on time rental payments and indicate via a new indicator within the Scorecard the submission of a positive rental payment history for the borrower.
“This change makes FHA requirements more flexible and can help remove barriers to homeownership, particularly for those with non-traditional credit or thin credit files,” said Deputy Assistant Secretary for Single Family Housing Julienne Joseph.
Lenders may begin indicating a borrower’s positive rental payment history in the TOTAL Mortgage Scorecard for scoring events on or after October 30, 2022, and for case numbers assigned on or after September 20, 2021.
The TOTAL Mortgage Scorecard is a statistically derived algorithm used to evaluate borrower credit history and mortgage application information. The Scorecard is accessed by lenders through most of the widely used industry Automated Underwriting Systems.