BLACKMAN, Allen <br/><br/>
Location-Efficient Mortgages :  is the rationale sound? 

 -  2001 
<br/><br/> Location efficient mortgage (LEM) programs are an increasingly popular approach to combating urban sprawl. LEMs allow families who want to live in densely populated, transit-rich communities to obtain a larger mortgage with a smaller down payment than traditional underwrinting guidelines allow. LEMs are premised on the proposition that homeowners in such "location-efficient" areas can safely be allowed to breach underwriting  guidelines designed to prevent mortgage default  because they have lower that average automobile-related transportation expenses and more income available for mortgage payments. This paper employs records of  more than 8000 FHA-insured mortagages matched with data on various measures of locatio efficiency to test this proportion. The results suggest that it does not hold and that LEMs - like other low-down-payment mortgage programs - will raise mortgage default rates. This cost must be weighed against any potential anti-sprawl benefits LEMs may have