A new collaboration between CitiMortgage, The First American Corporation, Neighborhood Housing Services of America, Just Price Solutions, and State Farm aims to bring low fixed-rate mortgages to borrowers with thin credit files.
The new “R-Home mortgage program” is an “automated and streamlined way of evaluating and verifying borrowers’ creditworthiness using alternative forms of payment history, such as rent, utilities and child care payments…”
It will rely on First American’s ANTHEM credit-evaluation model which uses non-traditional means to evaluate a borrower’s credit profile, especially useful if borrowers have limited traditional lines of credit and borrowing history.
The program is being launched as a pilot project in the Washington, DC area in an effort to serve 2,000 consumers, and will later be available nationwide.
It is believed that roughly 6.8 million non-homeowners lack sufficient credit history in the United States, making it difficult to obtain home financing through typical means.
The result has led many of these borrowers to seek financing through unconventional means, usually resulting in above-market interest rates from subprime lenders.
“R-Home mortgages will be a solution for borrowers who aren’t bad credit risks but either don’t have enough traditional credit history to get a mortgage or pay too much for alternative financing,” said Mary Lee Widener, President and Chief Executive Officer of NHSA.
State Farm has pledged a $100 million investment, CitiMortgage will service the loans, Just Price will provide automated underwriting, Neighborhood Housing Services of America will offer borrower counseling, and The First American Corporation will provide the credit scoring technology.
The Mortgage Guaranty Insurance Corporation and PMI Mortgage Insurance Company are providing mortgage insurance under the pilot program
“Many low- to moderate-income consumers are a widely under-served population when it comes to buying a first home,” said Jackson C. Cosey, Jr., Managing Director of Strategic Markets Business at Citi’s Consumer Lending Group.
“This is an important market that deserves the opportunity to have access to stable, fixed-rate mortgages. We understand that just because potential borrowers do not have FICO scores, it does not mean they are not creditworthy…”
The R-Home mortgage program is the first of its kind to combine private, public, and nonprofit organizations.