Concept Connects Renters With Landlords-With CUs As The Bridge
MADISON, Wis.-With the housing bust turning large numbers of home owners into renters, the Filene Research Institute is piloting a concept to bring together landlords and qualified renters-all for the purpose of leaning on the credit union for support.
Called CU-HomeWise, the effort includes a "responsible renters score"-similar to a credit score but reflects an individual's rental payment history-a website that connects landlords with qualified renters, and financial education programs to help first-time rental property owners get started.
The key to all of these tools, according to Filene Chief Innovation Officer Denise Gabel, is that consumers have to come to the credit union to get them.
"In this economy, we want credit unions to be on the front end of how you could classify renters, and connect them with landlords. So in the future this could help credit unions create a new business model around scoring levels of renters," Gabel proposed.
The score, provided through the credit union, would not rely too heavily on FICO metrics, as Gabel pointed out that score does not truly reflect a person's history of paying rent on time.
"If you go with a traditional FICO score, you could have someone with a really low number because life happened to him-maybe he lost his job for a while. But he is a responsible renter and he has the ability to repay. So we are testing a couple of algorithms."
If the new tenant-scoring method catches on, it could be a feather in the cap for CUs, according to Gabel.
"If someone wants to rent an apartment and they tell the landlord about their CU-HomeWise score, and then the only place that this score can be obtained is through a credit union, that immediately separates the CU from other financials within the community," she suggested. "It could be a powerful tool."
Once consumers have a responsible renter's score they would be loaded into a website along with listings for landlords who have loans for their property through the credit union. Renters and landlords would both use this site, linked to through the credit union's website, to find each other-making the credit union the go-to source for renters and landlords alike.
"Eventually the credit union would create this proprietary online community and the only way landlords can find these responsible renters is through credit union websites," Gabel said.
Beyond giving credit unions tools that banks don't have, CU-HomeWise helps make sure loans get paid. "The member who took out that loan for the rental property now has responsible renters, which means the rent gets paid on time and so does the mortgage."
Finding a responsible renter is a skill landlords often acquire over time, and CU-HomeWise targets members who are getting into the rental property business for the first time. The program also helps provides these individuals with guidance and educational resources about owning a rental property and managing their finances.