Background
The current high rate of foreclosure is both a chief policy concern and a key priority at the Federal Reserve Bank of Cleveland. Recent years have seen record numbers of foreclosures, with Fourth District states among those experiencing the highest foreclosure rates in the nation. Data show that foreclosure is a localized problem, concentrated both regionally and in certain neighborhoods. For example, subprime lending has occurred at a higher rate in low- and moderate-income communities, a fact that merits attention because subprime mortgages are more likely to end in foreclosure. In addition, vacant and abandoned properties can be a costly spillover effect from foreclosure, exacerbating a problem that many Fourth District communities experienced well before the most recent escalation of foreclosures.
The costs of foreclosures to homeowners and to communities are significant and potentially devastating, threatening local and regional economic growth and recovery. For borrowers, foreclosures can result in a loss of home equity, impaired credit, and more limited access to stable housing and employment. For communities, foreclosed and vacant properties can reduce the value of nearby homes, draining a community's investments in neighborhood revitalization and eroding local governments’ tax bases. Particularly in areas with declining populations and weakening economies, vacant and abandoned properties must be restored to productive use in order to stabilize neighborhoods and to re-establish housing markets.
The Cleveland Fed joins the Federal Reserve System in addressing the mortgage and foreclosure crisis through a variety of measures, including revisions to the Home Ownership and Equity Protection Act regulations; ongoing data analysis and research; and regional information-sharing forums. This online resource center offers resources for consumers, community development practitioners, and others interested in causes, repercussions, and tools for mitigating the effects of foreclosures in our area.