'Location efficient mortgages' may be the way to go

trainShould you get a better mortgage loan rate depending upon whether you need a car to get around or can take mass transportation?

One recent study suggests the answer, surprising to some, is yes. And, there is even a name for such a loan: location efficient mortgage.

Simply put, it means that when a lending institution figures out how much your loan ought to be, it should take into account the cost of your daily transportation needs. The thinking is, a household with say two or maybe three autos, considering the current price of gas and upkeep, is going to need more money to function than a household that uses buses and trains -- and, therefore, would be more likely to face foreclosure.
The study in question was done by the National Resources Defense Council and looked at 40,000 mortgages in three urban areas: San Francisco, Chicago and Jacksonville.

What it found, according to the Chicago Sun Times, is that mortgage defaults were higher in neighborhoods where residents relied on driving compared to ones where people lived nearer train stations.

Not everyone is convinced. The paper quotes the director of home ownership services for Neighborhood Housing Services of Chicago, Michael van Zalinger, as calling the new study "incomplete." He says getting rid of the car may save money, but typically not enough, in the samples studied, to really head off foreclosure in and of itself.

But in a news release from the NRDC, its co-director of its energy program, David Goldstein, said, "Add urban sprawl to the list of sources for our current financial mess. It's not just predatory lending or lax standards. The connection between transportation costs and mortgage default cannot be ignored."

Goldstein says addressing this issue sooner rather than later will help stabilize the real estate market in this country.

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate issues for several years.
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