Community organizers, state and federal government officials, and
representatives from banking, research and educations institutions are currently
meeting in Washington at a REO and Vacant Properties Summit sponsored by the
Federal Reserve Bank. The two day
conference is focused on examining the problems associated with vacant and
abandoned property and to explore approaches to neighborhood stabilization.
Governor Elizabeth Duke,
Board of Governors of the Federal Reserve opened the summit on Wednesday. In her remarks she introduced the types of
issues that are faced by communities with high rates of foreclosure and REO and
highlighted some of the lessons learned in the last few years about
neighborhood stabilization strategies.
She pointed out that the impact of each foreclosure goes far beyond
that one home; a conference participant estimated that every blighted home
negatively impacts five or six nearby homes.
Therefore, in Cleveland for example, where 11,500 homes have been
foreclosed, 60,000 others can lose value which leads to lower taxes to support
schools and other community services. The residents who remain in a community suffer
social losses as well as their communities decline.
These problems, Duke said, are not limited to older communities.
Formerly thriving subdivisions outside of larger metropolitan areas, once known
as "boomburbs," are now suffering some of the highest rates of
foreclosure and REO inventories. These
communities are often new and do not have the community development
infrastructures necessary to address the sudden problems they are facing. There are also indications that the so-called
shadow inventory may be larger than currently recognized so there may be
continuing downward pressure on prices, communities must confront problems
posed by speculative investors,
Duke said that some important lessons have already been learned about
community stabilization. First, there
must be a full understanding of mortgage markets, their dynamics, and
incentives. Earlier attempts to stabilize
neighborhoods through acquisition, rehabilitation financing, demolition and
land banking of blighted communities were constrained by unrealistic time
limitations. The complexities of the secondary mortgage
market have made it difficult for local governments and community organizations
to ascertain who owns a particular property, much less arrange for its purchase
in a timely way. Competition with more
flexible investors hampered community groups and their plans.
Second, good data are
necessary to target scarce resources. The funds provided under NSP, while
substantial, are not nearly sufficient to tackle the entire inventory of vacant
and abandoned homes; the strategic use of these funds, however, can help to
stabilize individual neighborhoods.
The third lesson, she said,
is that we need to use technology to create better decision making tools to
assist communities. This means keeping up-to-date records of foreclosures,
sheriff's sales, and the REO status of properties, as well as gathering
information on vacancies and tax delinquencies that can serve as a proxy for
identifying properties that may be falling into delinquency.
Fourth is the need to
collaborate in new ways in order to develop a comprehensive approach to
neighborhood stabilization efforts. Duke pointed out that the pre-conference
publication is replete with examples of local collaborations that have
successfully addressed neighborhood stabilization issues through partnerships
between federal, state, and local governments, community organizations,
lenders, servicers, universities, foundations, and others. The most promising
initiatives, she said, take a comprehensive view of community development.