FHA Issues Guidance Regarding Consideration of Rental Payment History

FHA recently issued Mortgagee Letter 2022-17 (the ML), which provides guidance regarding the consideration of a first time homebuyer’s positive rental history in connection with Title II forward purchase programs evaluated through FHA’s TOTAL Mortgage Scorecard (TOTAL).  The updates included in the ML may be implemented for TOTAL scoring events taking place on or after October 30, 2022, for case numbers assigned on or after September 20, 2021.

It is FHA’s position that using rental payment history promotes “a more complete credit evaluation” than is currently reflected in credit reporting data.  Accordingly, under the guidance set out in the ML, lenders are permitted to submit a purchase transaction to TOTAL indicating a positive rental payment history provided that at least one borrower is identified as a “first time homebuyer” (as such term is defined in the guidance), that the minimum decision credit score is 620 or greater, and that at least one borrower has a positive rental payment history with on-time monthly payments of $300 or more for the previous 12 months.  FHA Connection and TOTAL are being updated to enable lenders to make such an indication.  The guidance also explains that lenders must verify the borrower’s rental payment history by obtaining a copy of the executed rental or lease agreement, and by obtaining one of four additional types of documentation.