Guild Mortgage, who offers consumer direct lending, has a new program for first-time homebuyers. The program will now use rental payments records and residual income history in leua of credit scores. The program can up used on Federal Housing Administration (FHA), United States Department of Agriculture (USDA) and Department of Veterans Affairs (VA) loans.
Guild will take a report run by FormFree which show rental payment history and residual income analysis. A good report will allow a borrower to receive a lower interest rate and lower fees. Guild is a purchase-focues lender and reported $208 million net income in the first quarter of 2022. The company also reported $6 billion in orgination volume during the first quarter of 2022.
“A lack of credit history is a major obstacle faced by some first-time homebuyers, particularly minority homebuyers who are almost twice as likely not to have a credit score,” said David Battany, executive vice president of capital markets at Guild Mortgage.
The program can avoid the higher fees and interest rates other loans give borrowers that do not have a credit score. The FormFree report will delve into a borrowers’ bank transactions.
This is a wonderful program because around 19% around the country do not have a credit score according to Consumer Financial Protection Bureau’s (CFPB’s) “Data Point: Credit Invisibles” report. Among these American adults 11% are credit invisible. This means they do not have a credit file with Equifax, Experian and TransUnion. Among those that are credit invisible, 15% are Black and Hispanic compared to 9% of White and Asians.
“This issue is not unique to Hispanics, as other minorities and younger millennials also are disproportionately represented in the number of people considered credit invisible,” said Gary Acosta, co-founder and CEO of The National Association of Hispanic Real Estate Professionals (NAHREP).
“One of the biggest challenges for the mortgage industry in the coming years will be finding new metrics to predict financial capacity and evaluate credit worthiness,” Acosta said.
