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U.S. Senator Boxer, Natural Resources Defense Council, Countrywide, and Fannie Mae Announce New Incentives for Bay Area Home Buyers to Live Near Public Transportation

U.S. Senator Boxer, Natural Resources Defense Council, Countrywide, and Fannie Mae Announce New Incentives for Bay Area Home Buyers to Live Near Public Transportation

Published 03-13-00

Submitted by Fannie Mae

Bay Area homebuyers now have an important financial incentive to purchase a home with convenient access to efficient public transportation, U.S. Senator Barbara Boxer (D-CA) announced today. The Bay Area is among the first regions in the United States to have access to the Location Efficient MortgageCM, a mortgage initiative tailored to encourage homeownership by linking the region’s housing and public transportation resources. The Location Efficient Mortgage could increase home-buying power by thousands of dollars by allowing borrowers to put the money saved through the use of public transit towards the amount of mortgage for which they can qualify. Joining the Senator for today’s announcement were representatives from Countrywide Home Loans, Natural Resources Defense Council (NRDC), San Francisco Bay Area Rapid Transit (BART) District, and Fannie Mae (FNM/NYSE), the nation’s largest source of financing for home mortgages.

"This new mortgage offers great benefits for the people of the Bay Area," said Senator Boxer at a press conference at the Montgomery Street BART Station. "As local housing prices escalate, we need to find creative new ways to increase savings for home buyers. And as gridlock paralyzes the region’s roads, we must encourage greater use of mass transit. The Location Efficient Mortgage addresses both issues, making mortgages more affordable while promoting public transportation. "

Fannie Mae will purchase the loans originated under this initiative as part of the company’s $100 million Location Efficient Mortgage pilot available in two of California’s most densely populated regions – the Bay Area and Los Angeles County – as well as Seattle. In Los Angeles and the Bay Area, this new mortgage can help working families afford to purchase homes in these more expensive housing markets.

"Fannie Mae recognizes the housing challenges unique to the Bay Area, and has worked with our partners to design a mortgage that can help meet those housing needs," said Bill Chandler, director of the Fannie Mae Bay Area Partnership Office. "The premise of the Location Efficient Mortgage is that a home buyer living near public transportation is more likely to utilize that transportation and save money that might otherwise be spent on automobile use and upkeep. These borrowers can now use portion of that savings towards the amount of income needed to qualify for a house. This savings increases a borrower’s buying power."

The Location Efficient Mortgage recognizes home-buyer savings resulting from the purchase of a home located in a densely populated community served by efficient public transportation, and allows a portion of that potential savings to be used as additional borrower income in qualifying for a mortgage. That savings, called the Location Efficient Value (LEV), is calculated by a computerized mapping tool developed by the Center for Neighborhood Technology, a nonprofit organization based in Chicago, Illinois that promotes ecological, economic, and community development initiatives.

Several factors are used to determine the LEV that a home might qualify for, including residential density of a neighborhood, access to public transit, and auto ownership. In addition, the Location Efficient Mortgage has no income limits and offers more flexibility than standard mortgage financing, such as allowing for a lower down payment of three percent from the borrower’s own funds. Borrowers through this mortgage initiative must complete home buyer counseling before the purchase of the home.

The Location Efficient Mortgage encourages public transit use by offering borrowers a discount on Bay Area public transportation systems. Fannie Mae, Countrywide, PMI Mortgage Insurance Company, and Downey Savings and Loan will subsidize 25 percent of the cost of a transit pass for one year for up to two members of a household. The San Franciso Chamber of Commerce will administer the subsidized passes. In addition, in an effort to help market the new pilot to riders, BART will place in its train-cars 300 "Car Cards" and the San Francisco Municipal Railway (MUNI) will place 500 posters in its trains to help notify riders of this opportunity to become homeowners.

In June 1999, Fannie Mae announced the Location Efficient Mortgage as part of Fannie Mae’s 5-year, $16 billion "House Bay Area" investment plan to finance affordable housing for the nine Bay Area Counties of San Francisco, Santa Clara, San Mateo, Alameda, Contra Costa, Marin, Solano, Napa and Sonoma.

"Affordable housing is something that eludes us in many areas of the country," said Sidney Lenz, managing director of industry affairs at Countrywide. "By offering the Location Efficient Mortgage, Countrywide is able to create affordable home loan solutions for Bay Area residents who use one of the best public transportation systems in the country."

The Location Efficient Mortgage was developed by the NRDC, the Surface Transportation Policy Project and Center for Neighborhood Technology, with support from Fannie Mae.

"The Location Efficient Mortgage will give more choices to home buyers, allowing them to live in neighborhoods of their choice while reducing reliance on cars, which account for more than half of California’s air emission," said NRDC Energy Program Director David Goldstein. "Living in compact, transit-rich communities will cut air pollution, reduce traffic congestion, and alleviate pressure to build on the open lands we have left on the urban fringe."

The Location Efficient Mortgage assigns each neighborhood in the nine Bay Area counties a specific dollar-savings value, or LEV. Values represent average monthly cost savings to neighborhood residents, established in part by residential density, and access to public transportation. For example, in San Francisco’s Mission District near 16th and Mission Streets, a home has a Location Efficient Value of $290 per month, or $3,480 per year. A two-person household earning $60,000, purchasing in this neighborhood would qualify for a home selling for $189,500 as compared to qualifying for a home selling for $159,400 under traditional mortgage underwriting guidelines. Therefore, the Location Efficient Mortgage allows the borrower to increase home purchasing power by $30,100.

For more information on the new Location Efficient Mortgage, consumers can contact Countrywide Home Loans at (800) 747-1871 or call Fannie Mae’s Consumer Resource Center at 1-800-7-FANNIE (1-800-732-6643) Monday through Friday between the hours of 8:00 a.m. and 5:00 p.m. EDT.

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Location Efficient MortgageCM is a certified mark of the Institute for Location Efficiency, a California nonprofit organization.

Fannie Mae is a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation’s largest source of financing for home mortgages. Over the past 31 years, Fannie Mae has provided nearly $2.8 trillion of mortgage financing for over 34 million families. More information about Fannie Mae can be found on the Internet at http://www.fanniemae.com.

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