And on this episode of new programs that act like they're helping,
but don't actually do much.
It's landlords now getting paid to report your rental history to the credit bureaus.
Only 10% of people have their rental history reported on their credit report.
So you're talking about, about 44 million people who they make one
of their biggest monthly payments.
They make their rental payments on time for years, and that never works.
On their credit score, which is one of the most important factors in being able
to get a mortgage, a car loan, student loans, whatever you need, financial
access to with debt, your rent is not in.
And that.
And so getting a mortgage can be really difficult when you're like I've been
paying rent on time for a long amount of time, and that's not actually
showing up on your credit report.
Fannie Mae and Freddie Mac have tried to come up with their own
solutions to this. Fannie Mae already did
One thing.
And if you're not familiar with these two organizations is Fannie
Mae and Freddie Mac basically make the rules for conventional loans.
More, most of the conventional loans throughout the United States.
So Fannie Mae did a decent job trying to help here.
But what Fannie Mae basically did is they said, Hey, if you have rental
payments showing up on your bank statements, we'll actually use a software.
To find those and use those as a positive factor in approving you for a mortgage.
Now, this is a good start, but it's not super helpful for people who may
be pay in cash or, maybe the software can't detect those rental payments on time.
What Freddie Mac has done is super strange.
And I'm gonna explain a little bit why I don't think this is probably the
best route that they should have taken.
It's a, half-hearted attempt at what they're trying to solve here.
So what Freddie Mac has done is they basically said we're actually
gonna incentivize landlords to report rental history on credit
bureau or to credit bureaus.
So instead of actually helping.
Borrowers directly or people who are renting directly qualify for a mortgage
with their current rental history.
It's this like indirect long-term way to make that work, which
doesn't really make sense.
So here's how this works.
Basically, a person would buy a multifamily home with a Freddie Mac.
Loan.
Okay.
A multifamily home can be anything from a one to four unit conventional loan or
maybe a five-plus unit, 1 million to 7.5 a million dollar loan with Freddie Mac.
So you'll know right off the bat.
This is someone who purchases a new loan with Freddie Mac.
It's unclear if you can actually refinance and get in this program as well.
So basically a landlord purchases, a multifamily home, the landlord
then gets a closing cost credit, which at this point is unknown.
We don't know what this closing cost credit is, or reach out to Freddie Mac.
And I didn't hear anything from them.
It's unclear, but basically a landlord can then go purchase a multifamily
home, receive a closing cost credit.
And then the landlord is supposed to report the tenants rental
history to a company called Esusu.
If I'm pronouncing that correctly, basically what this company does is
they will then take the rental history and report it to credit bureaus, like
Equifax, TransUnion, and Experian.
Okay.
So here's how it affects renters.
It's only gonna report.
On-time rental payment data, which is great.
So what happens if you have a late payment automatically
unenrolls you from the program?
So never will late payments.
I forgot what it was called.
Never will late payments show up.
Okay.
It also reports to all three bureaus, TransUnion, Experian, and Equifax,
which is great because a lot of rent programs that will only report
to maybe two, one or two bureaus.
So this is actually improving your credit score.
They can also report up to 25 months of past on-time payments for an immediate
positive impact to your credit score.
All, no, this plan isn't bad.
It's just the way that Freddie Mac is trying to roll it out is not great.
This is great for the tenants who are a part of this program, who
their landlord automatically starts reporting their on-time rental history
payments to the credit bureaus.
But the fact that they're rolling it out this way through landlords,
they're trying to incentivize them through closing cost credit to do this.
But landlords really, there's not much of an incentive for landlords
to want to get their renters moved out and mortgage ready because then
that's more turnover for the landlord.
So still how it affects the runners
It is easier to get approved for a mortgage when you have higher
credit score and you've been paying, this is one of the largest monthly
payments that you have is your rent.
And so being able for that to show up on your credit report is
great for a mortgage approval.
Now it's unclear right now, if if landlords can take advantage
of this in a refinance.
So it probably wont
Currently impact you.
And that's one of the more frustrating things is like, if you're currently
renting right now and your landlord, even if they have a mortgage with Freddie Mac,
it's unclear if they'll be any incentive for them to go ahead and report your
rental history to the credit bureaus.
And so that's one of the big problem.
Here.
Another problem is there's like minimal incentive for current landlords to
make renters more mortgage ready.
So if you currently I think if you're a landlord and you have renters, what
incentive do you have to let them be more mortgage ready so that they can move out
and then you have to find more renters.
There's not a lot there, which is why they're trying to go
with a closing cost credit.
But this only applies for people who are purchasing a new loan
is what it looks like right now.
It's unclear for you can refinance and get the closing cost credit and then enroll.
It's just a strange way to implement it.
And it really does feel half-hearted because is basically saying like a
Hazel, we'll just take the new people.
The people who get new multifamily loans, which granted is a
lot of new multifamily loans.
Freddie Mac is one of the largest purchasers of multifamily loans.
But it's such a strange thing.
There's so many different ways they could have gone about this
to actually help home buyers.
If they're actually interested in helping renters become home buyers, the
most logical thing that they could have done is actually finance a credit for
renters who want to become home buyers to report the payment history already,
because the way that they're doing it now is they're saying, Hey, somebody
who buys a new multi-family loan or get an, gets a new multifamily loan through Freddie Mac
We'll give them a closing cost credit, which I imagine is probably going to
be at least a few thousand dollars it's they haven't said anything yet.
So that's what I'm imagining, just to be able to, then you have to enroll your
tenants in this program to report their rental history to the credit bureaus,
but you can actually report your own rental history to two credit bureaus
through this same company and through several other different companies.
And it only cost, it says $50 a year
And then if you want to report up to 24 months in the past, it's
another one-time $50 payment.
Only a hundred dollars in cost.
And so Freddie Mac could have gone to renters and said, Hey,
we're going to roll this program.
What we'll actually do is we'll help you get enrolled with this technology
company called Esusu, I think is the name or how you pronounce it.
We'll fund it for you.
So we'll pay a hundred bucks and we'll help you be able to take
your past on-time rental payments reports to the credit bureaus.
So you can now qualify for more.
That's cheaper and helps more people.
And if that's who they're actually trying to help, that's what makes more sense?
That's directly helping, not this indirect.
Yeah.
We'll have landlords try to, we'll send, incentivize them to do it.
And it only goes for like more current new multi-family mortgages.
It just feels like a really okay.
If you're interested, if you can see if your landlord actually
has a loan through Freddie Mac.
So there's a link in the description to this website on Freddie Mac's website,
you can search up the property name and see if Freddie Mac holds that loan.
Again, it's unclear if if you're currently renting right now, and even
if your landlord has a Freddie Mac loan.
It doesn't look like there's any incentive for them to go ahead and add your rental
history to the credit bureaus, unless they can refinance and maybe get a closing cost
credit, and then maybe they want to do it, or they're just doing it out of Goodwill,
which I don't anticipate that's going to happen
But then if you do want to enroll yourself in this, if you want to take your rental
history and go ahead and add this to your credit bureaus, if you do it yourself,
you can add it to TransUnion and Equifax.
You can add it to all three, but at least you can add it to to
help improve your credit score.
And they do say that.
They do see an average credit score increase of 51 points.
Every time this happens, it is $50 a year and $50 one time, if
you're going to add up to 24 months of past on-time rental payments.
So just to be clear, the problem is not with this company.
I think what this company is doing is fantastic.
It's helping a lot of people who haven't had their rental history reported on their
credit bureau is be able to qualify easier for a mortgage because that can really
help increase your credit score a ton.
If you can see a 50% increase in credit.
My issue is with the way that Freddie Mac has rolled this out.
This is trying to indirectly, it feels more like they're like a, almost like
virtual virtue signaling oh yeah, we want to help out the renters.
When in reality they're more just giving an incentive to landlords to give us
indirect help to renters in the future.
Maybe that's a bad take.
I just feel like there was a much better way, a much more
direct way to help renters.
With a completely different solution.
That's a lot cheaper and actually helps people get into homes more.
And it doesn't just stay on the side of the landlord, which it
seems like so much regulation.
And so many products have been on the site of the landlord
for such a long period of time.
So what do you think, let me know in the comments, I'd love to hear what
you think on this new change with Freddie Mac.