WASHINGTON -- A Freddie Mac official said that an alternative method of qualifying borrowers now being tested may be most helpful to middleincome borrowers and those who pay high rents.

In an experiment begun last fall, Freddie Mac bought small numbers of home loans underwritten through an alternative method by PNC Mortgage Corp., Vernon Hills, I11.

Now it is expanding the program to more lenders and casing income restrictions in an effort to get a reading on how different income and geographic groups respond.

Instead of using the ratio between housing debt and total income, PNC Mortgage used a potential borrower's existing monthly rent and utilities payments to gauge whether the applicant could make monthly mortgage payments.

Under traditional underwriting rules, borrowers are believed to be able to handle housing costs roughly equal to a third of their income.

But frequently renters pay more than that in rent and utilities, suggesting they could make higher house payments than the ratio method would indicate.

The alternative underwriting model was designed by Freddie Mac, PNC Mortgage, and the Mortgage Guaranty Insurance Corp., which insures the loans.

The government-backed agency, formally the Federal Home Loan Mortgage Corp., buys home loans from lenders. Freddie Mac and its larger rival, Fannie Mae, face heavy pressure from regulators to do more business with low- and moderate-income borrowers. Both agencies are experimenting with underwriting changes as they try to comply.

Freddie Mac announced recently that it is expanding its experiment to include six new lenders. The aim is to get a total of 4,000 loans by early next year, according to Andrea Stowers, director of affordable credit policy at Freddie Mac.

The program has been broadened so the agency can study loans from all over the country, and from borrowers with a broader income mix, Ms. Stowers said.

While the original program targeted low- and moderateincome borrowers, the new version will include loans made to first-time homebuyers of all groups.

"We decided we needed to see how [the alternative underwriting] affects people at all income levels," said Ms. Stowers, who designed new affordable-housing products at Fannie Mae before she moved to Freddie in 1993.

"Maybe low-income people qualify more often or less often, [but we] can't tell without a comparison," she said.

Preliminary results suggest, however, that borrowers who already pay high rent, and middle-income borrowers who would get a substantial tax advantage from homeownership, are most likely to benefit from the experimental method, Ms. Stowers said.

Freddie Mac will monitor these loans for a year to see how well they perform.

"Early payment defaults are the best indication that something went wrong with underwriting," Ms. Stowers said. "We think they won't perform any worse" than loans underwritten by standard guidelines, she said. Depending on how well the loans perform, Freddie Mac will decide whether to integrate the pilot into its existing programs or study the loans longer.

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