WASHINGTON — Rep. Nikema Williams (D-GA) has reintroduced legislation that would require mortgage lenders to consider alternative financial information when evaluating borrowers who request its use, a measure supporters say could expand access to homeownership for millions of consumers with limited or no traditional credit histories.
The bill, reintroduced Thursday, would require lenders to consider consumer-authorized alternative financial data — including bank account information and payment records not typically included in traditional credit reports — when a mortgage applicant requests that the information be used in the underwriting process.
The legislation would also require mortgage underwriting systems to incorporate consumer-permissioned data into lending decisions.
‘I’ve Been Upbanked’
Williams, a member of the House Financial Services Committee who represents Georgia’s 5th Congressional District, said the measure is designed to help consumers who regularly meet their financial obligations but struggle to qualify for mortgage credit because of limited traditional credit histories.
“I’ve been unbanked. I know what it’s like to work hard, pay your bills and do everything right, only to have the financial system tell you that you don’t qualify,” Williams said in a statement.
Williams said her own path to homeownership helped shape the legislation.
“Homeownership is one of the most powerful tools we have to build generational wealth and close the racial wealth gap,” she said. “My legislation will expand access to homeownership by recognizing financial responsibility wherever it’s found, helping more families secure the promise of America and build lasting wealth for future generations.”
32-Million Lack History
According to findings cited in the legislation, approximately 32 million Americans either lack a credit history with the nation’s major credit reporting agencies or do not have sufficient credit information to generate a credit score. The bill references prior research by the Consumer Financial Protection Bureau indicating that such consumers are disproportionately low-income, younger and people of color.
Supporters of the measure argue that incorporating alternative financial data into mortgage underwriting could provide lenders with a more complete view of a borrower’s financial behavior while expanding access to credit for consumers whose payment histories are not fully reflected in traditional credit reports.
What Legislation Requires
Under the legislation, lenders would be required to notify mortgage applicants of their right to submit additional credit information and explain the potential benefits of doing so. Those notices would need to be available in the eight most commonly spoken languages among individuals with limited English proficiency.
The bill also directs the CFPB to develop regulations implementing the new requirements and requires federal agencies and developers of mortgage underwriting systems to ensure compliance.
The legislation is co-sponsored by Reps. Sylvia Garcia, Bonnie Watson Coleman, Gwen Moore and Alma Adams.
The measure is also backed by the Consumer Federation of America and the National Consumer Law Center.
If enacted, the CFPB would have 18 months to issue final regulations before the new requirements take effect.
