While the Biden administration is pushing the wrong method to expand homeownership opportunities to those without significant wealth, a cross-partisan group of Congress is pushing a small but wise bill aimed at the same, admirable goal.
The bill is sponsored by Sen. Tim Scott (R-SC) , the ranking Republican on the Senate Committee on Banking, Housing, and Urban Affairs, but with support from Sen. Joe Manchin (D-WV) and Sen. Angus King (I-ME) , along with a list of other Republican House and Senate members. As emphasized by Sen. Katie Britt (R-AL) , a particularly avid supporter, the bill doesn’t pressure banks to loan to people with questionable credit histories — which is what Team Biden is pushing — but instead allows credit bureaus to consider less traditional ways that people can prove good credit reliability.
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The Biden regulatory approach, about which I wrote on May 2, would literally reduce the information available to high-risk lending institutions Fannie Mae and Freddie Mac as they consider whether would-be borrowers are credit-worthy. The approach of Scott, Manchin, Britt, and colleagues does the opposite: It expands the amount of information available to the credit bureaus upon which lenders rely.
Specifically, the bill would let property owners and utility providers report to the credit bureaus the payment records of applying borrowers. Because people with less wealth may not own credit cards or have other means of establishing their reliability, their records of on-time payments for rent and utilities might be the best way they can demonstrate bona fides as trustworthy customers. Scott himself faced this problem when first trying to establish a business three decades ago when his “best asset” was an old car with 253,000 miles on it. Eventually, he was able to find an outside investor who would help guarantee a loan for him, but most people in similar economic circumstances are neither so persistent nor so fortunate.
The bill sponsors say that about 26 million Americans are “credit invisible,” not because they have “bad” credit but because they lack any traditional credit records, such as car loans or mortgage payments. In testimony to Congress, Equifax CEO Mark Begor estimated that using the rent and utility data “could raise the credit scores of as many as 2.4 million consumers by an average of 30 points.” Those 30 points could be the difference between securing a mortgage and, conversely, being denied.
And to do it without creating systemic moral hazard . Just the opposite: As Britt said while questioning Begor and other credit bureau executives (all of whom then agreed with her), “the more information we have, it limits and mitigates the risk.”
This is housing policy with both heart and brains. Twentieth century political liberals deserve credit for first concentrating on how better to house low-income workers, but most of the best and most creative thinking on housing issues for 40 years has come from at least a certain subset of conservatives. Inspired by the late conservative Jack Kemp, who pushed so many anti-poverty ideas that it was hard to keep track of them, these conservatives avidly seek ways to expand homeownership options and lease agreements that provide workers a real stake in their homes and neighborhoods. Unlike the Left, their answer isn’t to have government subsidize iffy loans, but to help nurture more dependable borrowers in conditions that help them succeed.
Scott’s Credit Access and Inclusion Act is not a major panacea, but its enactment would be another helpful step in the expansion of the proverbial American Dream. There are no obvious downsides to its provisions. It merits unanimous, bipartisan support.
