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36 | M R EP O RT FEATURE How exactly does the program work, and is there any cost to the renter for participating in the program? T he program is offered to eligible Fannie Mae prop- erty owners, but this is a "positive-only" initiative. It is a choice to opt-in or opt-out. If the renter misses a payment, they are automatically unenrolled to preserve their credit standing. Fannie Mae is going to cover the cost for 12 months. Our goal is to accelerate adoption of rental payment reporting across the entire multifamily industry, and given where we sit in the housing ecosystem, we think that we have that opportunity to drive that. How did Fannie Mae choose its vendor partners for this program? T he vendors participating in this pilot are Esusu Financial Inc., Jetty Credit, and Rent Dynamics. What they are doing is making this quite easy for the borrower. As mentioned, Fannie Mae is going to cover the cost for 12 months, accessing the property owners and property management software systems, pulling all the information out of the systems, taking that data, putting it into a digestible format, and transmitting that data to the credit bureau. Besides the fact that we are making it easy for renters, what are the benefits for borrowers? TransUnion did a study on this and found that a lot of renters will choose a unit with rent reporting over one without, thus increasing the number of eligible renters at certain properties. The program will moti- vate renters to pay on time. TransUnion also reported that 73% of renters were more likely to pay on time if their rent was being reported, resulting in a reduction in delinquencies and an increase in net operating income. What will determine if the program continues or will be discontinued? W e have made a com- mitment for the next 12 months, as we will be testing the market, seeing what we are able to do, how many borrowers opt- in, and how many renters benefit. At that point, when we are done with the pilot program, we will sit back and evaluate what we were able to do, what we were able to accomplish, and then deter- mine what the next steps are. We have not predetermined anything for what may happen after the 12-month pilot. That is very typical of what we do: when we do a pilot program, we test the market and see what we can accomplish during this period of time. As I mentioned, this endeavor is part of our Equitable Housing Finance Plan, and one of two initia- tives that we are really pursuing in a big way. I am excited about what we are going to be able to learn over the next 12 months, and then we will be happy to tell everybody what the next steps are going to be. What are some of the other initiatives that Fannie Mae is undertaking to increase equitable housing? W e rolled out the Expanded Housing Choice Initiative this year, where we are providing a pricing incentive for owners in Texas and North Carolina, as those are two states where vouch- ers are not accepted as a source of income. We are incentivizing property owners in those markets to accept housing choice vouchers as a source of income for renters. We are working very closely with the U.S. Department of Housing & Urban Development (HUD) on that initiative. The goal is to get people in those markets that have housing choice vouchers greater access to a greater number of properties in those markets, and for those vouchers to be included as a source of income. It is also an opportunity for us to examine some of the challenges associated with an initiative of this nature, particularly as borrowers are trying to work through the system, and how we can work with HUD and with borrowers to try to make processes smoother and make it easier for them. We also have Sponsor-Initiated Affordability that was rolled out in 2021. The goal with that was to preserve naturally occurring affordable housing and workforce housing by offering incentives as well. The idea was that a sponsor would take 20% of their units and hold 20% of their units at 80% of the AMI [Area Median Income] for the life of the loan. When you think about all the rental increases that are happen- ing in the marketplace, what this does is incentivize a borrower to take a certain percentage of their units, set them aside, hold them at 80% of AMI for the life of the loan. In many respects, it is a way to proactively manufacture afford- able supply, or preserve affordable supply in the market, where we know affordability continues to be a huge challenge. I know you have been with Fannie Mae for more than 30 years now. Have you ever seen a time, other than now, where you can say affordability has been a bigger issue in preventing people from achieving homeownership? N o. I really have not. What is interesting about the time that we are in right now, is the affordable supply keeps getting smaller and smaller. We must figure out how to make sure that we do everything to support af- fordable housing, in general. But if we can help somebody who is a renter become a homeowner, we are going to help in those efforts. We are going to make sure that we are rolling out a variety of programs to support those efforts. Affordability and a safe, san- itary home, and a rental home is so critical. But obviously the way to build wealth as we have seen historically over the years is through homeownership. There is a clear connection between the work that we are doing and the goal of homeownership. Any final comments on the Positive Rent Payment Reporting pilot program? W e at Fannie Mae are excit- ed about this pilot, as you can imagine. Any program of this nature takes a lot of time, and it is a ton of analytics, a lot of work. The team worked hard getting this pilot program out into the marketplace, and I think our ulti- mate goal is to create a movement in the industry where positive rental payment reporting becomes something that becomes more of a standard. Anything we can do to get us to that place would be perceived as a success. "The goal for many renters, in many instances, particularly given what homeownership does in terms of building wealth, is to ultimately become a homeowner." —Michele M. Evans, EVP and Head of the Multifamily Division, Fannie Mae