Homeowners in areas that are car-dependent and without transit options are at greater risk of foreclosure, according to a new report by the Natural Resources Defense Council (NRDC) which is calling for mortgage underwriting standards to start taking so-called “location-efficiency” into account.
The report focuses on the impact of location efficiency, a concept pioneered by NRDC and other groups in the 1990s, on mortgage performance in three key cities: Chicago, San Francisco and Jacksonville, Fl. It shows that vehicle ownership is key to predicting mortgage performance and suggests it should be taken into account by mortgage underwriters, policymakers, and real-estate developers.
Transportation costs represent a significant financial outlay — accounting for roughly 17% of the average American household’s income. The report found that if your only choice is to drive, you have much less economic flexibility — flexibility that can protect you from foreclosure in tough times.
NRDC is recommending that public policies encourage location efficient land use, infrastructure and transportation; support location efficient communities to help reduce foreclosures; have mortgage underwriting practices that provide access to proportionally better qualifying terms for purchasers of location efficient homes; and more research and analysis be done to develop and refine tools to assess the impact of location efficiency.
For a full copy of the report, click here. See also Robert Selna’s story in the Chronicle today.
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Tags: Neighborhoods Risk, Risk
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