Location efficient mortgages allow people to buy more expensive homes than they normally would be able by factoring in the money they'll save on transportation costs.
The concept was developed by the Center for Neighborhood Technology and the Natural Resources Defense Council and is backed by Fannie Mae.
In high density, transit-rich environments, the cost associated with transportation is greatly reduced.
Program advocates warn potential LEM participants that, while there is no limitation on the use or ownership of automobiles, this program does not lower monthly payments to the mortgage company, and that the increased purchasing power is granted based on the presumption that the household is actually taking advantage of reduced car use.
These loans are resalable on the secondary market through the Federal National Mortgage Association (FNMA).