the first quarter of 2011, compared with 6 percent of mortgages originated to borrowers in high - income neighborhoods. the higher rates of delinquency suggest that homeownership may have been a riskier proposition over the past decade for households in low - and moderate - income neighborhoods than in high - income neighborhoods. delinquency rates are higher, in part, because borrowers in these communities were more likely to end up in complicated or inappropriate mortgage products, unacceptably often as a result of unfair and deceptive lending practices. but borrowers in these communities may also be more sensitive to house price declines because they may have fewer financial resources outside of housing, and they may have had little equity in the property to begin with. 10 although investing in a home has risks, it also has positive qualities. households may feel more comfortable investing in housing than in other investments because houses are familiar, tangible, and provide concrete ties to the community. regular mortgage payments may serve as a useful savings commitment device. finally, homes pay out a “ dividend ” in the form of housing services – that is, providing a place to live. the housing services provided by an owner - occupied home – such as control over one ’ s own space – may be preferable to those provided by a rental. in making a decision about homeownership, prospective buyers need to consider the risks as well as the benefits – in particular, the possibility that house prices can fall and that such declines can have long - lasting effects on their financial well - being. the current decline in national house prices and the preceding run - up were, of course, unusually large even by historical standards. but even during times when house prices were rising nationally, prices fell steeply in certain local markets, such as texas in the mid - 1980s or massachusetts in the for a further discussion of the increase in lending over this period, see, christopher mayer, and karen pence ( 2008 ), “ subprime mortgages : what, where, and to whom? ” finance and economics discussion series 2008 – 29 ( washington : board of governors of the federal reserve system, june ). houses represented nearly three - fourths of total assets for homeowners in low - and moderate - income neighborhoods in 2007, according to the survey of consumer finances. in contrast, homes typically represented a bit over half of gross assets for homeowners in higher income neighborhoods in 2007. the median combined loan - to - value

##closures on neighborhood house prices, crime, and government budgets. as a result, fewer short sales likely occur than would be best for communities overall. this externality is one of the reasons why a government program that provides financial incentives to servicers and borrowers for pursuing short sales or deeds - in - lieu of foreclosure remains undersubscribed. 13 indeed, as of march 2011, only about 12, 000 agreements had been initiated under the program. this is an area where lenders can and certainly should do more. the federal reserve, in conjunction with other financial banking regulators and government agencies, has embarked on initiatives to help resolve the existing stock of vacant properties and prevent even more properties from entering foreclosure. 14 the first initiative involves revisions to the rules governing the community reinvestment act ( cra ) that took effect in january. under the revised rules, depository institutions receive positive consideration in cra examinations for participating in community stabilization activities in areas designated as eligible for funds under the neighborhood stabilization program authorized by the congress. such activities might include donating properties that they ’ ve taken possession of – known as real estate owned – to nonprofit housing organizations or providing financing for the purchase and rehabilitation of foreclosed, abandoned, or vacant properties. although it is too early to assess the effect of these cra changes, the participation of more than 600 banks and industry stakeholders in a webinar recently hosted by the federal reserve indicates that there is interest and potential in this tool. our host today, the federal reserve bank of cleveland, played a key role in envisioning these changes to the cra rules. the second initiative, which is ongoing, is the development of uniform national servicing standards. these standards should address the proper handling of both performing and non - performing loans, including loss - mitigation procedures and foreclosure processing, and should lead to improved customer treatment and better transparency and oversight of mortgage servicers ’ processes. the intent is for servicers to be held to the same standards regardless of their regulator and regardless of whether the loans being serviced are held on the originator ’ s books, have been sold, or have been securitized. by having a common set of standards for the mortgage servicing industry, the financial regulatory agencies will emphasize the importance of servicing practices that promote the best interests of borrowers and the broader housing market. let me turn finally to mortgage credit. no one wants to see a return to the