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As the American economy continues to be dragged down by the mortgage crisis, a new NRDC report shows a direct link between the transportation costs associated with a given neighborhood or community and its foreclosure rate. "Location Efficiency and Mortgage Default
," focuses on the impact of "location efficiency," a concept pioneered by NRDC and other groups in the 1990's, on mortgage performance in key cities. It shows that, because transportation costs are a significant household expenditure, rates of vehicle ownership - largely determined by neighborhood compactness, walkability, and access to public transit - is key to predicting mortgage performance and should be taken into account by mortgage underwriters, policymakers and real estate developers. The effect of location efficiency is clear when comparing foreclosure probabilities for two homebuyers with exactly the same profile in terms of credit score, debt-to-income ratio and loan-to-value ratio in differing neighborhoods. The research shows that the buyer in the more location-efficient area will be less likely to default. The report suggests policy changes in land use, infrastructure and transportation, as well as mortgage underwriting practices.
This study has been peer-reviewed and accepted for academic journal publication. A briefing document
is available for press and public consumption. David Goldstein, co-director of the Energy Program at NRDC, has written a blog about the study
. Also available is a recording of a telebriefing
about the report's implications hosted by NRDC staffers, experts in the field and Congressman Earl Blumenauer (D-OR).
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