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Time Right for FNM's 'Smart Commute' Plan

Unfortunately, lenders are often stuck on the suburban model, and consider only one-third of a borrower's income when they decide how much mortgage debt he or she can afford. Hare concludes that this makes urban housing "mortgage unaffordable" and pushes people to the car-reliant 'burbs. He calls it "transportation redlining."

The SmartCommute program was meant to address this imbalance. For borrowers willing to buy a home within a quarter mile of a public bus stop or half a mile of a commuter rail stop, lenders would calculate the savings from using public transit and consider it additional money that could go toward a mortgage, thereby increasing urban-dwellers' buying power.

While the program is still theoretically available from Countrywide Financial (CFC) and smaller regional lenders, a public relations contact at Fannie Mae had never heard of it and even after some digging couldn't send me information about it--a sign of how much they've let it wither.

(Interested consumers can call Fannie Mae at 800-732-6643.)

Here's why it's time to actively revive it:

  • When it first came out, gas prices were far south of the $4 mark they've crossed for some Americans lately. Gas is now pricey enough that Americans are changing their lifestyles to avoid driving.
  • Public transportation ridership hit its highest level in 50 years in 2007, according to the American Public Transportation Association. It was up more than 2% from the previous year, to 10.3 billion trips.
  • Denver, Atlanta, Philadelphia, St. Louis and Santa Fe are among the cities that have seen double-digit growth in use of their transit systems. They are also cities where the Smart Commute program was offered when it first came out.
  • Additionally, the blogosphere is rife with predictions that sustained high gas prices are the beginning of the end of the suburbs. Note Peter Viles' comments on a Los Angeles Times blog about outlying suburban home prices weakening more than others.

    On the New York Times (NYT) Freakonomics blog, Daniel Hamermesh notes that in Washington, D.C., homes near metro stations are maintaining their value better than others; homes near metro stations in the city are even rising.

    While reports of the dying American suburb are no doubt greatly exaggerated, people are absolutely getting out of their cars and moving closer in to jobs, shopping and services. Mixed-use, transportation-friendly communities have been on developers' radar for a few years now.

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