Why Don’t Mortgage Lenders Account for Transportation Costs?

Every house or apartment comes with an embedded cost: transportation. Depending on the location and local infrastructure, those costs can be very small or very large.

Downtown Marquette, MI. Should walkable neighborhoods have lower borrowing rates? Image: ##http://up.secondwavemedia.com/features/walkablecities41713.aspx## Second Wave Media##

There’s a good deal of evidence that transportation expenses can have a direct impact on mortgage loan defaults. Shane Phillips at Network blog Better Institutions says banks should consider these costs when assessing risk and assigning a mortgage rate.

It seems to follow that since walkable, mixed-use communities tend to have lower foreclosure rates, they should also be eligible for lower mortgage interest rates. Fewer people defaulting on their home loans means fewer losses to account for, so the profit that banks need to earn on each individual mortgage can be lower. In turn, those lower rates would increase the appeal of choosing safer, healthier, more sustainable communities in which to live (i.e., walkable urbanism / smart growth).

Advocacy’s great — necessary, even — but nothing would make the case for urban living like a 3.00% mortgage interest rate.

That means Fannie Mae and Freddie Mac — government backed mortgages — need to be at least as available in walkable urban neighborhoods as they are in sprawling ones. On the private side, Phillips says, lenders need to be sophisticated enough to tell the difference between the two.

Elsewhere today: Twin City Sidewalks offers reasons why cyclists sometimes don’t stop at stop signs. The Political Environment says a sagging bridge in Green Bay tells the story of the Scott Walker administration’s backward infrastructure spending priorities. And Bike Delaware has photos of flooded bike infrastructure in Boulder, Colorado.

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