Fed Hosts Neighborhood Stabilization Summit

Community organizers, state and federal government officials, andrnrepresentatives from banking, research and educations institutions are currentlyrnmeeting in Washington at a REO and Vacant Properties Summit sponsored by thernFederal Reserve Bank.  The two dayrnconference is focused on examining the problems associated with vacant andrnabandoned property and to explore approaches to neighborhood stabilization.</p

Governor Elizabeth Duke,rnBoard of Governors of the Federal Reserve opened the summit on Wednesday.  In her remarks she introduced the types ofrnissues that are faced by communities with high rates of foreclosure and REO andrnhighlighted some of the lessons learned in the last few years aboutrnneighborhood stabilization strategies.</p

She pointed out that the impact of each foreclosure goes far beyondrnthat one home; a conference participant estimated that every blighted homernnegatively impacts five or six nearby homes. rnTherefore, in Cleveland for example, where 11,500 homes have beenrnforeclosed, 60,000 others can lose value which leads to lower taxes to supportrnschools and other community services. The residents who remain in a community sufferrnsocial losses as well as their communities decline. </p

These problems, Duke said, are not limited to older communities.rnFormerly thriving subdivisions outside of larger metropolitan areas, once knownrnas “boomburbs,” are now suffering some of the highest rates ofrnforeclosure and REO inventories.  Theserncommunities are often new and do not have the community developmentrninfrastructures necessary to address the sudden problems they are facing.  There are also indications that the so-calledrnshadow inventory may be larger than currently recognized so there may berncontinuing downward pressure on prices, communities must confront problemsrnposed by speculative investors,</p

Duke said that some important lessons have already been learned aboutrncommunity stabilization.  First, therernmust be a full understanding of mortgage markets, their dynamics, andrnincentives.  Earlier attempts to stabilizernneighborhoods through acquisition, rehabilitation financing, demolition andrnland banking of blighted communities were constrained by unrealistic timernlimitations.  The complexities of the secondary mortgagernmarket have made it difficult for local governments and community organizationsrnto ascertain who owns a particular property, much less arrange for its purchasernin a timely way.  Competition with morernflexible investors hampered community groups and their plans. </p

Second, good data arernnecessary to target scarce resources. The funds provided under NSP, whilernsubstantial, are not nearly sufficient to tackle the entire inventory of vacantrnand abandoned homes; the strategic use of these funds, however, can help tornstabilize individual neighborhoods. </p

The third lesson, she said,rnis that we need to use technology to create better decision making tools tornassist communities. This means keeping up-to-date records of foreclosures,rnsheriff’s sales, and the REO status of properties, as well as gatheringrninformation on vacancies and tax delinquencies that can serve as a proxy forrnidentifying properties that may be falling into delinquency. </p

Fourth is the need torncollaborate in new ways in order to develop a comprehensive approach tornneighborhood stabilization efforts. Duke pointed out that the pre-conferencernpublication is replete with examples of local collaborations that havernsuccessfully addressed neighborhood stabilization issues through partnershipsrnbetween federal, state, and local governments, community organizations,rnlenders, servicers, universities, foundations, and others. The most promisingrninitiatives, she said, take a comprehensive view of community development. </p

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