3 refi lenders will consider Airbnb income

For the first time, homeowners who rent their primary residence on Airbnb can include their hosting income on mortgage applications when they refinance their existing loans with three lenders, including giant Quicken Loans.

Fannie Mae has agreed to back the loans and, if all goes well after a 90-day trial with the three lenders, “make it broadly available,” said Jonathan Lawless, Fannie’s vice president of product development and affordable housing.

This will be the first time that Fannie has considered income from a borrower’s home, rather than a separate rental property, on mortgage applications. It also represents a big step in recognizing income from the gig economy.

“We’re not just a W-2 economy anymore,” said Bob Walters, president and chief operating officer of Quicken Loans.

The loans cannot exceed Fannie’s loan limits, which range from $453,100 in most places to $679,650 in high-cost counties, including most of the Bay Area. Borrowers must meet other Fannie requirements, including a minimum credit score of 620.

The other lenders in the pilot project are Citizens Bank and Better Mortgage. Borrowers do not need to have an existing mortgage with the three lenders to refinance with them.

Fannie has agreed to the trial because Airbnb can verify income claimed on the refi applications. Borrowers must submit proof of income from Airbnb.

Borrowers must have been renting their primary residence for at least 12 months to qualify. If they have 12 to 23 months, lenders will count 75 percent of the monthly average toward qualifying income. If they have 24 months or more, lenders will use 100 percent of the average. That’s similar to the way lenders consider other forms of variable income such as overtime and bonuses, Walters said.

The news comes at a time when rising mortgage rates could slow the refi business. The average rate on a 30-year fixedrate mortgage rose to 4.32 percent this week, up from 4.22 percent last week and 3.95 percent on Jan. 4, Freddie Mac said Thursday.

Quicken Loans was the largest retail mortgage lender in the fourth quarter of last year, overtaking longtime leader Wells Fargo. However, Quicken is heavily dependent on refinance mortgages and could have a hard time staying on top if rates continue to rise, Guy Cecala, publisher of Inside Mortgage Finance, said last week.

Walters said Quicken Loans has a healthy purchase-mortgage business, and started talking with Airbnb months ago, before rates rose.

“This may be the moment for some folks, for some it might not be, but we wanted to pursue this initiative because we believe it has tremendous long-term value,” Airbnb spokesman Nick Papas said.

Lenders are not planning to consider Airbnb income on purchase mortgage applications, because people trying to buy a home won’t have a history of renting out that home, even if they have a history of renting out other homes.

Although the announcement is a step forward for the gig economy, it’s unclear how many people will benefit, because most homeowners refinancing mortgages already qualified for that loan without Airbnb income.

However, Walters said, it could help in situations where, for example, a husband and wife were both working but the wife retired and is running an Airbnb rental to supplement income. It also could help people who want to refinance a loan for more than the existing balance and use the extra money to improve their rental space by adding another room or separate entrance.

Some lenders will consider income from other gig jobs, such as driving for Uber or Lyft, the same way they look at other self-employment income. “Those types of income are recognized if a two-year history of receipt can be documented,” a Quicken Loans spokesman said in an email. “There must be an income history and they must be documented through tax returns. They are treated the same as other self-employment income from a freelancer.”

Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender

This will be the first time that Fannie Mae has considered income from a borrower’s home, rather than a separate rental property. It also represents a big step in recognizing income from the gig economy.