Wednesday, November 28, 2012

Location Discriminatory Mortgages Redux



First what I wrote. OMG more than 8 years ago:

Tuesday, July 06, 2004
 Location Discriminatory Mortgages
I once thought "Location Efficient Mortgages" (LEMs could address the problem of exurban development patterns (e.g. living in Riverside and working in LA) but then my brain started working again. I call location efficient mortgages transit apartheid. "Location efficient mortgage" is like "smart growth." Who would want a location -inefficient- mortgage or who would support dumb growth. Meaningless catch phrases, nothing more. Location Discriminatory Mortgages are the exactly descriptive phrase. Funny how the old VA loan policies that inadvertently used to favor new suburban housing, and jumpstarted the exurban nation trend, were struck down as unfair by the very same people advocating this new version of redlining. (Red Line as in Los Angeles and Boston, etc.) I'm surprised at the willingness of people who claim to want fairness to resort to unequal treatment (LEMs, density bonuses, transit subsidies, tax breaks) as a first step when they agree with the agenda. I'm also concerned about the unintended consequences that always appear. We both know that govt with good intentions ALWAYS results in unanticipated problems. In the case of LEMs; people will buy near transit, use more transit, pay less taxes to local govt and eventually get cars. Result, normal traffic overloading local roads while burdened by higher transit subsidies. In case you haven't noticed I'm describing LEMs in terms of transit but we were talking about POV commute patterns and Prop 13. That's because of two things. First LEMs have been hijacked by transit advocates despite there being no connection. Second, lenders already do a little of this when you apply for a mortgage. They take into account your living costs including travel budgets when determining lending limits.

Now what the New york Times (of course) is pushing:

Factoring in Commuting Costs

MORTGAGE lenders do not figure in a household’s likely commuting costs when weighing loan applications, but a recent study suggests that borrowers of moderate means would be smart to calculate these costs themselves before buying.

The study, published in October by the Center for Housing Policy and the Center for Neighborhood Technology, looked at transportation and housing costs in the 25 largest metropolitan areas. It found that transportation costs rose faster than incomes in every area over the last decade.

That has added to the financial burden shouldered by moderate-income homeowners, defined as households earning 50 to 100 percent of a metropolitan area’s median income. Transportation consumes 30 percent of their income, on average. Add housing costs to that and the combined cost burden rises to 72 percent.
...
The study also found that some metropolitan areas generally considered more affordable than New York become less so after transportation is figured in. For example in Houston, where housing development is more sprawling, transportation consumes 32 percent of income, compared with 22 percent in New York, which has a more robust transit system.
...
Scott Bernstein, the president of the Center for Neighborhood Technology in Chicago, argues that transportation costs are quantifiable enough that they ought to be factored into underwriting. And they were, during the first half of the last decade, in an experiment the center conducted jointly with Fannie Mae. Called a “Location-Efficient Mortgage,” the product was a contrasting proposition to the “drive till you qualify” strategy of finding an affordable home. The mortgage compensated borrowers applying to buy in areas with lots of transportation choices, and close to jobs and amenities.
...
Tested in a handful of markets before 2007, the mortgages were issued to about 2,000 borrowers and, based on the center’s evaluation of a representative sample, showed a very low default rate. But the experiment ended with the mortgage market collapse.
...
The national calculator could be ready by year’s end. Another calculator developed by the center, called Abogo (abogo.cnt.org), lets people plug in an address and find out what a typical household in that area spends on transportation.

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Unfuggingbelievable. Let's start at the top and tackle other bits in later posts. "For example in Houston, where housing development is more sprawling, transportation consumes 32 percent of income, compared with 22 percent in New York, which has a more robust transit system." Texas income tax 0%. New York State 6.85%, New York City ~3%. Idiots with calculators and agendas are dangerous.

15 comments:

Cinco-X said...

Are you trying to say that "neo-urbanist" are trying to drive down the value of suburban and exurban housing (effectively increasing the relative value of urban housing) by insisting that the additional cost of commuting be factored in to the financing considerations for residences outside of cities?

Rob Dawg said...

Yes, they are redlining based on factors that are biased to prefer cenurban locations.

Cinco-X said...

"Rob Dawg said...

Yes, they are redlining based on factors that are biased to prefer cenurban locations"


In effect, they're implementing a wealth transfer from the countryside to the cities, as if wealth were not already concentrated there...

Rob Dawg said...

My tinfoil is tighter. I believe this is about forcing people beck to the cities and onto public transit.

Cinco-X said...

"Rob Dawg said...

My tinfoil is tighter. I believe this is about forcing people beck to the cities and onto public transit. "


I'm hard pressed to see that...If they wipe out the auto industry, it would wipe out one of the largest union workforces in the country...not good for the liberal agenda...a wealth extraction strategy is more up their alley...

w said...

There you go...clinging to your archaeic automobiles and bibles.

Silly Rednecks.

Re-education will begin with mani-pedis all around. A quick show at the local theater, followed by a vegan-non-soy meal at the nearest locavore restaurant.

Cobradriver said...

I wonder about people and calculators sometimes.

Buy in Sarasota...house payment.

Buy in Port Charlotte...no debt.

My gas costs are ~150/mo. That's a small percent of my take home(that's all mine!).

I'll take consolation in the fact that ~30 percent of the houses in the country are paid for. You won't force them to do much. The fucked up part? I could see the government going after people with no debt. "It's not fair!" You know,they think we have plenty of extra...

Chris

Cinco-X said...

"Cobradriver said...The fucked up part? I could see the government going after people with no debt. "It's not fair!" You know,they think we have plenty of extra..."

Ya' gotta spread the wealth, brother...

Rob Dawg said...

You gotta skim the wealth brother.

NoVa Sideliner said...

Or how about "For example in Houston, where housing development is more sprawling, HOUSING consumes XX percent of income, compared with YY percent in New York...", and add that to the calculations.

I'm not sure what the XX and YY are, but anecdotally from my friends who wish to live in New York but live in Hoboken, there is a large difference, and an astronomical difference when comparing 2-bdrm-apts to 2-bdrm-apts.

Cinco-X said...

NoVa Sideliner said...

Steve C?

Thomas Stone said...

Cinco, Steve C is thoroughly dead. I think people should take into account ALL of their expenses when budgeting, especially when determining what they can actually afford to pay for housing. The DTI limits on mortgages are less insane than they were a few years ago but many people still borrow more than they should.

Cinco-X said...

Thomas Stone said...

Cinco, Steve C is thoroughly dead.


Wishful thinking I guess...just a bit weird to see another NoVa...

[and]...I think people should take into account ALL of their expenses when budgeting, especially when determining what they can actually afford to pay for housing. The DTI limits on mortgages are less insane than they were a few years ago but many people still borrow more than they should.

Agreed...but isn't this more of a case where someone in gubmint is trying to mandate that these various expenses be factored into the bank's calculations according to a preset formula? A formula that makes it preferable to live in an urban area?

TJandTheBear said...

Geez, why not factor in the actual size of what you're buying? I mean, you get an over-sized closet in NYC for the price of a McMansion (with a large yard!) in Houston.

Cinco-X said...

TJandTheBear said...Geez, why not factor in the actual size of what you're buying? I mean, you get an over-sized closet in NYC for the price of a McMansion

That's not a closet...it's an efficiency apartment...