Senate Commerce Committee Statement to Senate Resolution No. 47, New Jersey, June 9, 2022

Summary

The New Jersey Senate Commerce Committee statement dated June 9, 2022 reports Senate Resolution No. 47 favorably. The resolution urges Congress to pass legislation requiring mortgage lenders to consider rent payments when determining creditworthiness. The statement says Fannie Mae has begun to count certain rent payments and that its data show 17 percent of people who had not owned a home in the previous three years and would not have qualified would qualify if rental payments were considered. It says New Jersey is limited in requiring this of mortgage lenders by federal law that preempts State regulation.

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SENATE COMMERCE COMMITTEE

STATEMENT TO

SENATE
RESOLUTION No. 47

STATE
OF NEW JERSEY

DATED: JUNE 9,
2022

The
Senate Commerce Committee reports favorably Senate Resolution No. 47.

This
Senate resolution urges Congress to pass legislation requiring mortgage lenders
to consider rent payments when determining people’s credit worthiness.

When
most people purchase a home, money in the form of a mortgage is borrowed for
the purchase from a bank, but many lower-income people who rent homes in New
Jersey are disqualified due to lack of credit history. Despite little or no
credit history, many renters in the State have demonstrated their
creditworthiness by consistently paying rent to landlords every month.

Fannie
Mae, a federally backed institution that buys mortgages from banks and other
financial institutions that underwrite mortgages, has begun to count certain
people’s rent payments when making underwriting decisions.

Data
from Fannie Mae shows that 17 percent of people who have not owned a home in
the previous three years and would not have previously qualified would qualify
if rental payments were considered on mortgage applications. Of those 17
percent, many are people of color who have limited credit histories, and who
have been shut out of the housing market for a variety of reasons.

Though
Fannie Mae is taking a step in the right direction, many other institutions who
extend mortgages do not take rent payments into account when determining a
person’s creditworthiness. New Jersey is limited in its ability to require
mortgage lenders to consider rent payments when making determinations on
applicants by federal law that preempts State regulation.

If
Congress takes action to require more mortgage lenders to account for rent
payments when making decisions on whether to extend credit to a person who
wants to buy a home, it will enable more people to own their own homes.

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