Rent Reporting for Credit Building for Public Housing Authorities

Transcription

1 Rent Reporting for Credit Building for Public Housing Authorities Presented by HUD, Credit Builders Alliance, and the Corporation for Enterprise Development May 5, Credit Builders Alliance, Inc. Some rights reserved. CREDIT BUILDERS ALLIANCE and the accompanying Logo are trademarksofcredit Builders Alliance, Inc. This document is licensed under a Creative Commons Attribution-Noncommercial-Share Alike License (US/v.3.0). Noncommercial uses are permitted on the condition that you include an attribution to Credit Builders Alliance. If you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one. More information regarding the license is at: Requests for permissions beyond the scope of the license should be directed to Credit Builders Alliance, Inc., at Credit Builders Alliance ("CBA"), a not-for-profit organization, makes this information available for informational purposes only. This information is not intended as legal, financial, other advice, and you and your clients should consult qualified [email protected] advisors before making any decisions. CBA does not represent 2014 Credit that Builders any of the Alliance, information Inc. Some will rights produce reserved. results.

2 Introduction Sandy Norcom, U.S. Department of Housing and Urban Development

3 Agenda Introduction (HUD) Why is Credit Building important and what exactly is it? How does Rent Reporting fit in? (CBA) Who are CBA and CFED? (CBA& CFED) Why Rent Reporting? (CFED) Power of Rent Reporting Pilot results (CBA) Future research & key implementation considerations (CFED& CBA) Implementing Rent Reporting for Credit Building (CBA) Q&A

4 Why Credit Building? Increases Cash Flow and Creates Opportunities to Save Improves Employment Outcomes Increases Housing Options Improves Access to High-Quality Credit Products Expands Opportunities for Small Business Growth Buffers Economic Shocks and Smooths Income

5 What is Credit Building? Definitions CREDIT REPAIR: Reducing current debt and paying off historical accounts in collections. Credit Repair = Focus on fixing past behavior CREDIT BUILDING: The act of making ontime monthly payments on a financial product such as an installment loan or a credit card that is reported by the creditor to the major credit bureaus. GOOD CREDIT

6 What is Credit Building? How it Works Opening and successfully managing financial products is key to building and maintaininga good credit history.

7 Rent Reporting: A NEW CB Strategy Rent reporting:the establishment of a rental trade line and regular monthly reporting of rentalpayments to at least one of the major consumer credit bureaus for inclusion on traditional consumer credit reports. Rent reporting for credit building:the pairing of rent reporting with financial/credit coaching or other financial capability programming with the aim of supporting residents to recognize and leverage rent reporting as a credit building opportunity.

8 Rent Reporting for Credit Building Financial Capability in Action Every on-time monthly payment reinforces positive financial habits!

9 Introduction: Who is Credit Builders Alliance? To create innovative solutions for asset building organizations helping low-and modest income households build credit and financial access. Good Credit is an Asset Mission driven nonprofits and other entities are uniquely positioned to help the households they serve build credit as an asset often the FOUNDATIONAL asset.

10 Introduction: CBA Credit Builder Community

11 Introduction: CBA s One-Stop-Shop CBA members share with and learn from each other Network & Increase Visibility (Credit Building Community Provide valuable technical assistance, training, and consulting Build Capacity & Enhance Programming (Credit Building Toolkit) Credit Builder Community Members Report & Pull Reports (Credit Building Platform) Connect to the credit bureaus through our oneof-a-kind umbrella arrangements Innovate & Engage with Field (Credit Building Hot Topics) Updates on relevant innovations, products, services, activity, and best practices in the field

12 About CFED CFED (Corporation for Enterprise Development) empowers individuals and families to build and preserve assets by advancing policies and strategies that help them go to college, buy a home, start a business, and save for now and for the future. We combine the vision of a think tank with real-world experience to: Identify Good Ideas: CFED s research finds ideas with potential for making the economy work for everyone, particularly those on the margins. Develop partnerships: CFED works in partnership with diverse organizations across the country to promote lasting change. Bring Them to Scale: CFED brings together community practice, public policy and private markets to achieve the greatest economic facebook.com/cfednews cfed.org/blog/inclusiveeconomy

13 Household Financial Security Framework What it takes to build financial security and opportunity over time LEARN financial skills & build human capital Assets can increase income and earning capacity EARN income & public benefits SAVE for emergencies & future INVEST in assets to generate wealth, income PROTECT gains made through insurance & avoiding predatory facebook.com/cfednews cfed.org/blog/inclusiveeconomy

14 The Power of Rent Reporting Pilot Problem: Unlike homeowners, renters do not build credit by making their monthly housing payments. Solution: Reporting rental payments offers low-income renters an opportunity to build credit as a financial asset: Mission-driven affordable housing organizations are poised to help them do so. Goal: To catalyze rent reporting as a valuable and viable option for low-income renters to build credit and financial capability.

15 CBA s Power of Rent Reporting Pilot 8

16 Pilot Overview EPIC Property Management Marquette Management Affordable Housing, Education and Development East Bay Asian Local Development Corporation Covenant Community Capital Cleveland Housing Network AHC Greater Baltimore Commonwealth Land Trust

17 Experian RentBureau : How Rent Reporting Works

18 Privacy Act Affordable housing owners or operators who benefit from federal assistance are subject to the Privacy Act of 1974, which places certain safeguards on the sharing of residents personally identifiable information with a third party, including a credit bureau. Any property owner or operator subject to the Privacy Act and wishing to report rental payment data to the credit bureaus must obtain a resident s opt-in i.e., prior written consent to do so.

19 Pilot Results Summary Renters see rent reporting as a good opportunity for credit building Rent reporting offers a significant credit building opportunity to affordable housing renters Rent reporting is a promising strategy for AHPs seeking to increase resident participation and success in financial coaching and asset building programs Rent reporting in combination with financial coaching can incentivize residents to increase their rates of paying rent on time

20 Pilot Results: Renter Interest Pilot participant survey results: 38% have reviewed their credit report in the past 12 months 96% reported that having good credit is important to them 97% reported that paying rent on time is a good way for them to build their credit

21 Pilot Results: Credit Impact Establish Score 100% of residents with no trades transitioned to the thinfile category and are now SCOREABLEby VantageScore 3.0. Risk Segment Percentage of Unscoreable Population Average VantageScore 3.0 before Average VantageScore 3.0 after Prime 72% N/A 688 Nonprime 28% N/A 646 Subprime 0% N/A N/A Total 100% N/A 676

22 Pilot Results: Credit Impact Increase Score 90% Change in Participant Credit Score 80% 70% 60% 50% 40% 30% 79% 79% = avg. increase 23 points 20% 10% 0% 14% 7% Increase No Change Decrease

23 Pilot Results: Credit Impact Improve Risk Percentage of Participants 60% 50% 40% 30% 20% 10% 0% Change in Participant Score Tiers with the Inclusion of Rental Data 3% 0% Uscoreable (Highest Risk) 55% 47% Without rental trade line 19% 26% 24% 27% Subprime Nonprime Prime (Lowest Risk) Credit Score Tier With rental trade line

24 Pilot Results: Credit Impact Increase Score Participant Credit Score Change by Baseline Score Tier % 58% 71% % = avg. increase 32 points Prime Nonprime Subprime # with score decrease # with no score change # with score increase

25 Pilot Results: Promising Practices Clearly connect rent reporting with relevant and specific credit building goals. Incorporating rent reporting enrollment into a regular resident interaction is an efficient and effective strategy for getting high rates of resident participation. Connecting the rent reporting for credit building opportunity with existing financial coaching and asset building programming gives affordable housing providers an additional hook to increase resident engagement and successful participation. Integrating rent reporting for credit building into financial coaching and asset building programming empowers and supports residents to translate their credit improvements into real progress toward their broader financial goals, such as budgeting, saving, and building assets.

26 Pilot Results: On-time Payments Change in Payment for Regularly Late Renters (initial late payment rate of at least 40%) Percentage of renters who regularly pay late 67% 68% 57% 53% 54% 33% 34% 26% % who decreased % who decreased by at least 25% Change in rate of late payment Opted In Opt-In Eligible Opt-Out Nonparticipant

27 Learn more at:

28 Future Opportunities & Research More behaviorally-informed research on increasing resident opt-in. More evaluation of rent reporting s impact on residents credit profiles and scores. More research on effective strategies for helping residents translate credit improvements into actual savings, new opportunities, and assets, and for leveraging rent reporting as a positive incentive for on-time rent payment. Productive dialogue within the credit industry regarding the standardization of rent reporting policies and procedures to ensure they accommodate the specific needs of affordable housing providers

29 Key Implementation Considerations Funding for preliminary organizational/ option assessment and program implementation Internal buy-in and prioritization Technological and programmatic readiness and capacity building commitment

30 CBA Rent Reporting for Credit Building 101 Overview

31 Rent Reporting for Credit Building Options for PHAs 1. Assess organizational interest and capacity 2. Connect directly with the credit bureaus (may consider working with payment processing companies) to report 3. Design and integrate a more comprehensive Rent Reporting for Credit Building initiative into programming, including ideally a plan for outcome tracking & evaluation

32 Questions Q&A Please type your questions into the chat box

33 PHA Invite Interested in working with HUD on a rent payment study? Pamela Lee [email protected] Todd Richardson [email protected]

34 Thank You! Please be in touch Sandy Norcom Sarah Chenven & Carolyn Schulte Doug Ryan