How we’re increasing homeownership opportunities through data and automation

Traditionally, credit has played an important role for borrowers to obtain a mortgage with competitive interest rates, but this model has historically not accounted for consumers who may have thin credit profiles — or no credit at all.

Affordability issues, redlining, and wealth gaps are just some reasons minorities have faced roadblocks to homeownership. Additionally, NAR found that Black homebuyer applicants were rejected for mortgage loans at a rate 2.5 times greater than white applicants.

Manual documentation and assessment of an individual’s rental payment history has long been used to develop a credit history for borrowers with nontraditional credit. Fannie Mae recently introduced a feature in DU that identifies and considers a potential borrower’s positive rental payment history, helping lenders reach underserved borrowers without traditional credit histories using an automated underwriting solution.

We are happy to announce that Blend Mortgage Suite users have the ability to use this new Fannie Mae feature with Blend. Lenders can choose to have Blend-powered data fed directly to DU and retrieve 12 months of asset data to support a rental payment history review. This also creates a seamless flow from application portal to underwriter’s desk.

Why this integration matters

While Fannie Mae’s adjustments to DU in support of positive rent payments are expected to increase access to financing for first-time homeowners, the process is still reliant on accurate data to work effectively. We have been working hard to address any final hurdles borrowers or lenders face in adopting this new tool. The integration between Blend’s mortgage software and DU enables the automated transfer of data. Blend’s robust integrations and data verification capabilities may help participants in the process to benefit from reduced errors and manual reviews.

We are proud to support this automatic, digitally-enabled identification of recurring rent payments, in support of helping more borrowers achieve a positive credit decision. This particularly matters for borrowers of color with positive rent payment history who have statistically been less likely to be approved for a mortgage.

This automatic process improves lenders’ workflows and is a more efficient way to review and potentially approve borrower eligibility. It’s also a boon for consumers because the data needed will automatically be provided by Blend to DU. Providing lenders access to updates like rent payment automation helps ensure their businesses stay operationally effective while helping a broader group of underrepresented individuals get into the homes of their dreams.

A better way to meet market demand

An automatic path to including rent history may provide lenders with broader reach to historically underserved individuals and newer entrants to the market.

Owning a home is viewed as a source of household and intergenerational wealth, something minorities have found less achievable, with a homeownership rate of 46% for Black Americans, compared to 75% for white families. Automatically including rent payments may open up opportunities for more minorities to fulfill the American dream too.

In addition, it can help provide more coverage of Millennials who may have thin credit profiles.

Lenders are still reacting to the new reality in which Millennials make up the largest share of homebuyers at 37%, and Generation Z homebuyers are quickly entering the market. Both generations have expectations of shopping and purchasing a home through technology. As early as 2017, 99% of aspiring Millennial homeowners used technology to improve their home purchase experiences.

The pandemic’s impact accelerated the mortgage industry’s urgency for digital transformation in general. And Fannie Mae’s move to allow DU to consider positive rent payment history demonstrates a positive step in a larger conversation around alternative data sources for underwriting in combination with modern, digital workflows.

Work with Blend to better serve today’s consumers

We believe increasing access to Fannie Mae’s positive rent payments feature will help expand minority homeownership and get closer to eliminating credit bias.

Through data-driven products and features like Blend Income, identification of recurring rent payments, and verification of assets, we’re working to help lenders make homeownership less complicated and more attainable for borrowers in underserved communities.

Existing Blend customers can now take advantage of the enhanced verification of asset feature powered by rental history credit assessment.

Interested in learning more about how Blend can transform banking experiences for your customers?

• Check out our digital mortgage suite