rent reporting for credit building housing matters...

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RentReportingforCreditBuilding2017HousingMatters!Conference

October26,2017


Objectives

• UnderstandthevalueofCreditBuildingasacriticalanddistinctFinancialCapabilityStrategy

• RaiseawarenessaboutthePowerofRentReportingforCreditBuilding.

• LearnabouthowpublicandaffordablehousingprovidersareimplementingRRCBacrossthecountry.


HelpingorganizationsmovepeoplefrompovertytoprosperitythroughCreditBuilding.

GoodCreditisanAsset

Missiondrivennonprofitsandotherentitiesareuniquelypositionedtohelpthehouseholdstheyservebuildcredit

asanasset– oftentheFOUNDATIONALasset.

IntroductiontoCreditBuildersAlliance


Good“Credit”:PassporttotheNewEconomy


IncreasesAccess,Affordability,andOptions for…

n Financialproductsn RentalHousingn Utilitiesn Cellphoneplansn Insuranceproductsn AssetBuildingn Employment

WhyCreditBuilding?


PaidinFulleachmonth=30day0%loan

400%+APR=cycleofdebt

Withoutaccesstoaffordablecredititisdifficultifnotimpossibletoachieveormaintainfinancialstabilityorsecurity

WhyCreditBuilding?SmoothsIncome&BuffersShocks


$10,000autoloan5yearterm

Score InterestRate MonthlyPayment

500 15% $237.00

620 9.4% $210.00

720 3.4% $181.00

760+ 2%(orless)! $175 (orless)!

PotentialSavingseachmonth=$62

over5years=$3,720

SOURCE:www.myfico.com 2016

WhyCreditBuilding?IncreasesCashFlow&Reduces

Expenses

$250,000mortgage30yearfixed

Score InterestRate MonthlyP&IPayment

<620 Not Approved620 4.7% $1,291.00

760 3.1% $1,064.00

PotentialSavingseachmonth=$227over30years=

$81,720


https://www.consumerreports.org/

https://www.consumerreports.org/


CREDITBUILDING: EstablishingandmaintainingACTIVE(payingon-time)tradelines(likeinstallmentloansorrevolvingcreditcards)thatisreportedbythecreditortothemajorcreditbureaus.

STRONGCREDITHISTORY

WhatisCreditBuilding?


AnactiveInstallment(loan):

WhatisCreditBuilding?Whatisanactivetradeline?

n Hasabalancen Hasamonthlypaymentn Isnotclosed


AnactiveRevolving(creditcard):

WhatisCreditBuilding?Whatisanactivetradeline?

n Doesn’tneedtohaveabalanceorpayment

n Atleastonepaymenthasbeenmadeinthepast6months(dateoflastactivity)


Whatisrentreporting?Regularmonthlyreportingoftenantrentpaymentstoatleastoneofthemajorconsumercreditbureausforinclusiononconsumercreditreports

Whatisrentreportingforcreditbuilding?Thepairingofrentreportingwithcredit/financialcoachingand/oreducationandassetbuildingprogramsforthepurposeofsupportingresidentstobuildcreditasafoundationalassetandleverageimprovedcredittoachievefinancialgoals

RRCB:Definitions


CBA’sRentReportingforCreditBuildingServiceSupportsmissiondrivenaffordablehousingproviders toimplementrentreportingforcreditbuildinginitiativesinordertohelpresidents buildtheircredithistoriesandofferthemapositiveincentiveforon-timerentpayment.

CBARentReportingforCreditBuilding


Problem:Unlikehomeowners,rentersdonot‘getcredit’ontheircreditreportformakingtheirmonthlyhousingpayments.45%ofindividualsinlow-incomeneighborhoodsare‘credit invisible’or‘unscorable’.Manyhavefewopportunitiestobuildcredithistory.

RentReportingforCreditBuildingProgramTheory

Solution:Reportingrentalpaymentsofferslow-incomerentersanopportunitytobuildcreditasafinancialassetandmission-drivenaffordablehousingproviders(AHP)arepoisedtohelpthemdoso.CBAisspreadingawarenessofandsupportingAHPstodevelopandimplementRentReportingforCreditBuildinginitiativesandalsoworkingwiththecreditbureausandotherindustrypartnerstolessenandremovechallengestoreportingforAHPs.

Goal:ToincreasethenumberofAHPsreportingrentaldatatothecreditbureaus;increasethenumberofaffordablehousingrentersbuildingcreditviamonthlyrentpayments;increasethenumberofaffordablehousingrentersworkingtoimprovetheirfinancialcapabilityand/orbuildassets.


WhyRentReporting?

RentReporting

CreditBuilding

AssetBuilding

FinancialStability


Residentsgaintheopportunitytobuildcreditwithoutassumingadditionaldebtthroughtheestablishmentofanew,positive,activetradelineontheirtraditionalconsumercreditreport

ResidentServiceProvidersgainaccesstoacreditbuildingproduct/toolwhichtheycanwrapcoachingandeducationaroundanddirectlyprovideresidentswithmeanstomeasurablyimprovetheircreditprofile

PropertyManagersgaintheopportunitytoapositiveincentiveforon-timerentpaymentandacompetitiveadvantageinrecruitingnewresidents.

WhyCreditBuilding?ProgramGoals


PilotOverview

EPICPropertyManagement

EastBayAsianLocalDevelopmentCorporation

CovenantCommunityCapital

MarquetteManagement

ClevelandHousingNetwork

AHCGreaterBaltimore

AffordableHousing,EducationandDevelopment

CommonwealthLandTrust


RentReportingforCreditProgramModel

Andmeasurechangein:


PilotResults

38%havereviewedtheircreditreportinthepast12months

96%reportedthathavinggoodcreditisimportanttothem

97%reportedthatpayingrentontimeisagoodwayforthemtobuildtheircredit

Pilotparticipantsurveyresults:


PilotResults

100%ofresidentswithnotradestransitionedtothethin-filecategoryandarenowSCOREABLE byVantageScore3.0.

RiskSegment

PercentageofUnscoreablePopulation

AverageVantageScore3.0 before

AverageVantageScore3.0 after

Prime 72% N/A 688Nonprime 28% N/A 646Subprime 0% N/A N/ATotal 100% N/A 676


PilotResults

410

32

0

5

10

15

20

25

30

35

Prime Nonprime Subprime

AverageParticipantCreditScoreIncreasebyBaselineScoreTier

(inpoints)79%

14% 7%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Increase NoChange Decrease

ChangeinParticipantCreditScore

79%32


PilotResults

79%

4511 16

54 42 36

138 131

489

0

100

200

300

400

500

600

Prime Nonprime Subprime

ParticipantCreditScoreChangebyBaselineScoreTier

#withscoredecrease #withnoscorechange #withscoreincrease

90%71%58%


PilotResults

3%

55%

19%24%

0%

47%

26% 27%

0%

10%

20%

30%

40%

50%

60%

Uscoreable(HighestRisk)

Subprime Nonprime Prime(LowestRisk)

Percen

tageofP

articipants

CreditScoreTier

ChangeinParticipantScoreTierswiththeInclusionofRentalData

Withoutrentaltradeline Withrentaltradeline


HowDoesCHNGetSuchaHighEnrollmentRate?90% Opt-InEnrollment

Rate

25% reduction in late payments

among chronically late payers

41 point average credit score increase

§ BehavioralEconomics101-leveragingattentionattherighttime

§ Opt-Inisanopeningforconversation§ Continueconversationatthetime

youreviewtheircreditreport§ Ensureimportanceofcredit/

rentistopofmindwhenmakingtheirdecision


Rentalpaymentinformationcanbereportedtooneormoreofthemajor

creditbureausby…APropertyManager

AThirdPartyPaymentProcessor/Serviceprovider

Or

HowRentReportingWorks


Opt-InOpt-OutAutomatic

ResidentParticipation

ResidentParticipationOptions*:

*mustcomplywithPrivacyAct


AffordablehousingownersoroperatorswhobenefitfromfederalassistancearesubjecttothePrivacyActof1974,whichplacescertainsafeguardsonthesharingofresidents’personallyidentifiableinformationwithathirdparty,includingacreditbureau.

AnypropertyowneroroperatorsubjecttothePrivacyActandwishingtoreportrentalpaymentdatatothecreditbureausmustobtainaresident’sopt-in— i.e.,priorwrittenconsent— todoso.

PrivacyActConsiderations


FAQs

Doesrentalinformationshowuponthecreditreportasaninstallmentorrevolvingaccount?

Neitheractually.Rentalinformationreportedonthecreditreportfunctionsasanopentradeline.Ithasarecurringmonthlysetpaymentanddoesnotcalculateeachmonthlypaymentagainstanyoverallbalancebasedonthelease.


FAQs

Isitpossibleforrentreportingtohaveanegativeimpactonanindividual’screditscore?

Yes.Theadditionofanynewtradelineonacreditreport,evenonewithonlypositivepaymenthistory,canpotentiallyresultinadecreaseincreditscoreintheshort-term.


FAQs

Howcouldapositivetradelinehaveanegativeimpactoncreditscore?

Debttocreditratio

Averagelengthofhistory

Movementbetweenscorecards


Arerentaltradesfactoredintoallcreditscores?NewerscoresincludingVantageScore3.0andFICO9areoptimizedforrentaldata.Olderandmorecommonlyusedscoresweredesignedbeforethereportingofmonthlyrentaldatawascommonplace.Manymayfactor-inrentaltradesbutourunderstandingoftheimpactislimited.

FAQs


ConsiderationsforPropertyManagers

§ Compliance/Liability

§ TimeCommitment

§ ControloverReportingProcess

§ Cost


3rd PartyServicesforRentReporting

Let’sexploresomeoptions

• RentTrack:paymentprocessing+rentreporting• RentDynamics- RentPlus:rentreporting• RentalKharma:RentalVerificationandReporting

• Others:ClearNow,Rezzcard,PayYourRent,RentReporters


www.renttrack.com*specialdiscountforCBA

members

Model: PaymentProcessorHowitworks:ResidentsenrollinelectronicpaymentsandrentisreportedmonthlytoallthreecreditbureausCosts:Monthlyfeeperunit– canbepaidbyresident,byhousingproviderorsplitOthernotes:Residentscanseetheircreditscoresonlineatonsetanduseonlinecredittools(extracosttoreceivecreditscoreeachmonth)


GeneralStats:§ AverageincreaseinVantageScore of9points§ Forsubprimeconsumers(scores<650),theaveragepointincreasewas

29pointsin2-6months§ 100% ofresidentswithoutascorebecamescoreable,withanaverage

startingVantageScore of639

PortlandCommunityReinvestmentInitiative:§ 47residentsenrolled§ Systemeasy;onlinepaymentscomewithanemailreminderandanemail

receipteverymonth§ RentTrack oftenwastheirfirstuseofautopay§ RentTrack optionalmonthlycreditscorereviewfee-basedservice(1st onefree)§ Asof9/2016,averagescoreincreaseforenrolledresidentswas32points


Optionsforindividualrenters

• RentTrack:Directtoresidentoption• RentalKharma:Paymentverifier• Manyothersexist

Challenge:• Servicesforindividualrentersarestillfairlyexpensiveforlow-incomerenters


ü Organizationalbuy-inatalllevelsandunderstandingofmissionandbusinessalignment

ü Capableandresponsiveproperty/assetmanagementteamandsoftware/ITcontact(s)

ü Residentservicescapacitytocoach/educateandmotivateresidentsaboutcreditbuildingandlinkagetofinancialgoals

CharacteristicsofSuccessfulRRCBInitiatives


RRCBProcessOverview

OrganizationalCommitment

AssessReportingOptions

Outreach,Education&

OutcomeTrackingPlans

Application&Credentialing

(Direct)/Back-endCoordination(3P)

ProgramImplementation


OrganizationalAssessment:AreasofInquiry

EstablishingNeedandBuy-inforRentReporting

§ Whatarethecreditneeds/issuesamongyourclients?§ DoesprogramstaffsupportRentReportingandseeafitwithyourcurrentprograms?

§ Howtogeneratebuy-inacrossdepartments(and/or)thirdpartiesinvolved?

§ WhatkeyoutcomesareyouhopingtoachievethroughRentReporting?

§ Arethereanylegal/liabilityconcerns?



Whatisthein-housecapacityrequiredtoimplementaRRCBprogram?

§ Whatdepartments/keyrolesneedtobeinvolvedandatwhatlevel:§ Leadership§ Funding§ ProgramStaff- ResidentServices§ ProgramStaff- PropertyManagement



Whatisrequiredfrom3rd partiestoimplementaRRCBprogram?

§ NeedsfromThirdParties§ IT/TechConsultants§ Softwareproviders§ 3rd partypropertymanagers



WhatdoesaRRCBprogramworkflowlooklike?

§ Enrollment/Outreachstrategies,opportunities§ IntegrationwithexistingFinancialCapability/FinancialEducationprogramming

§ Howwillsuccessbemeasured?§ Programimplementation,policiesandprocedures


RentReportingforCreditBuildingThankYou!

Questions

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