Jennifer Henry of Equifax: Accelerating Access to Credit for Marginalized Communities Can Provide Benefits on a National Scale
Jennifer Henry is Vice President of Strategy and Marketing with Equifax Mortgage & Housing Services. She is responsible for pricing, product management, product marketing, campaign management and mergers and acquisitions. She brings more than 20 years of experience to her position at Equifax, including operations, technology, marketing, sales, product management, mortgage loan quality and loan origination services. Prior to her position at Equifax, she held leadership roles with First American Mortgage Solutions and Fannie Mae.
As the U.S. housing market remains strong, there is an increased emphasis on removing barriers to home ownership for minority consumers and marginalized groups. The entire industry, including the GSEs, mortgage collaboratives, lenders and mortgage technology providers, are focused on working together to bring greater inclusion and insight to the mortgage lending process. While there are more tools, technology advancements, access to data and specific programs tailored to these groups than ever before, there are still additional steps the industry can take to truly make homeownership a reality for all.
Research has consistently shown that communities with a high rate of homeownership tend to flourish and be more economically resilient, with children and families more likely to thrive and build generational wealth. However, the reality is that securing a traditional mortgage continues to be a challenge for millions of the U.S. population, given their financial situation and the current credit data available. According to the Consumer Financial Protection Bureau, 26 million Americans are what is known as “credit invisible,” meaning they have no established credit history or are living with subprime credit (scores below 668); and another 19 million are so-called “thin file” consumers, with too little data to produce a traditional credit score.
The CFPB also confirms that Black and Hispanic consumers are considerably more likely to be credit invisible, or have unscored credit records, than White or Asian consumers. About 15 percent of Black and Hispanic consumers are currently classified as credit invisible compared to just 9 percent of White consumers. Additionally, 13 percent of Black consumers (and 12 percent of Hispanic consumers) have un-scorable records compared to 7 percent of White consumers.
Consumers are more than just their credit score. While credit reports remain a strong indicator of credit history and past financial reliability, Fair Credit Reporting Act compliant information, that is not included in traditional credit report data, has the potential to help responsibly expand consumer access to credit and support a more inclusive economy. Access to this alternative data, such as rental payment history, consumer-permissioned utility payment information and even cell phone and cable bill data, can provide additional insight for a more complete financial picture of the borrower.
Notably, rent payments are currently not reflected in traditional credit reports or credit scores, even though it is often one of the largest, most consistent bills that millions of consumers pay. With more than 44 million households currently renting in the U.S., including rental payment data would help credit-invisible and first-time home buyers. The challenge is that nearly 50 percent of rental properties are managed by large and/or national property management companies, and while rental payment data is easier for these firms to report today than it has been in the past, it still isn’t always reported accurately, if at all. The other 50 percent of rental properties are managed by individual property owners or local property management companies, and there is currently no standardized process for them to feasibly report this data.
While it can be challenging to access and compile, rent aggregators who contribute rental payment data to consumer credit reporting agencies are helping create financial wellness for communities, while also providing individuals with the opportunity to establish and build a credit history based on something they already do – pay their rent on time. Showing a positive and consistent rent payment history can also demonstrate a consumer’s ability to make timely future mortgage payments, in turn helping that consumer gain access to credit that they ultimately deserve.
In addition to rent payments, utility payment data could stand to benefit lower-income Americans and many members of minority groups. This also includes consumer-permissioned reporting of cell phone bills and payments, which is important because the majority of Americans, 97%, currently own a cell phone.
The housing industry has long served as the engine for our national economy and homeownership is the primary contributor to wealth building for the majority of the U.S. With advancements in access to alternative data and insights, the industry is finally in a position to extend this opportunity to even more Americans – providing benefits on a national scale.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at email@example.com; or Michael Tucker, editorial manager, at firstname.lastname@example.org.)