New Report Links Homeowners’ Auto Dependence With Foreclosure Risk

Homeowners in car-dependent areas without access to alternative transportation are at greater risk of foreclosure, according to a report
released yesterday by the Natural Resources Defense Council (NRDC) that
calls for mortgage underwriting standards to begin taking so-called "location-efficiency" into account.

Foreclosure_Rate_Homes_Sale_Chicago_Suburbs_5wKfNDSWQE0l.jpgWeeds spring up near a foreclosed home in Illinois. (Photo: Getty)

The NRDC examined data for 40,000 mortgages in Chicago, Jacksonville, and San Francisco, seeking to test the contention — emphasized most
often by the nonprofit Center for Neighborhood Technology — that
affordable housing should include transportation costs as well as
mortgage bills.

And what did the report’s authors find?

In
all three cities … statistically sound results [indicated] that the
probability of mortgage foreclosure increases as neighborhood vehicle
ownership levels rise, after controlling for income. These results
suggest that mortgage lenders should include measures of location
efficiency in their underwriting to more accurately predict the risk of
default.

In addition to including transit access and
walkability in mortgage underwriters’ measurement of borrowing terms,
the NRDC recommended that location-efficiency be formally adopted as a
goal for community planners. Particularly in Sun Belt and West Coast
areas where waves of foreclosures
have prompted new fears of suburban blight, the report suggests that
rebuilding neighborhoods with location-efficiency in mind could stave
off negative effects from any future downturn in home prices.

NRDC’s conclusions are already being heeded by federal officials. Several House Democrats banded together
this summer to add language to their chamber’s climate bill asking the
Federal Housing Administration (FHA) to insure 50,000
location-efficient mortgages.

That climate legislation is
stalled for the time being, but the Obama adminstration’s deputy
housing and urban development secretary said last week that the White House would spend $10 million on research aimed at boosting the issuance of location-efficient home loans.

  • Kellan

    It’s about time.

    When we bought our home, we realized that commuting costs ALONE were going to knock off about $200 a month from our expendable income. Needless to say, we downsized. No, we didn’t buy a smaller car, we changed jobs. My partner took a job that paid about 20% less than her other job, but without the commute, we were still ahead.

    And having to keep only one car has given us LOTS more extra money at the end of the month.

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