SAN FRANCISCO–Companies such as Airbnb that make it possible to rent rooms are doing more than upending the lodging industry: they are causing problems for homeowners seeking to refinance their mortgages.
A number of large banks, including Bank of America and Wells Fargo, are applying additional scrutiny to customers applying for mortgage refi’s, according to The Wall Street Journal. Customers of those banks who also rent rooms in their homes told the Journal they were told they would have to pay higher interest rates.
At the heart of the issue is how to classify loans in the Airbnb age, the Journal said. While historically a house was either a principal residence or an investment property, those classifications have gotten murkier as more people rent out their homes or rooms in their homes.
As of July, The Wall Street Journal reported Airbnb’s website had 455,223 active listings in the U.S.
“That is posing challenges to lenders and frustrating some customers, illustrating how fast-paced technological change can reverberate in unexpected ways,” the publication said in its analysis. “The issue comes up when borrowers report income from services such as Airbnb when applying for a new loan, often in hope of improving their credit profile. That, they hope, can lead to a better interest rate on a loan.”
A Bank of America spokesperson told The Wall Street Journal the bank doesn’t provide home-equity lines of credit on investment properties.
He said the bank would consider a customer’s primary residence an investment property if there was a “material amount of commercial activity,” but that “incremental renting” wouldn’t be an issue, the Journal quoted him as saying.