##ure, finding a particularly important role for declining house prices ( gerardi, shapiro, and willen, 2007 ). the federal reserve bank of philadelphia is conducting a five - year study of pre - purchase homeownership counseling. that study will provide important information on the benefits of counseling services in fostering sustainable homeownership and help us understand the long - term effects of financial - management skills on the credit worthiness of low - and moderate - income homebuyers. in addition to this ongoing research, the federal reserve is supporting efforts to reach troubled borrowers and to raise awareness in communities about ways to prevent foreclosures. since july, the community affairs offices across the federal reserve system have sponsored or cosponsored more than fifty events related to foreclosures, reaching more than 4, 000 attendees including lenders, counselors, community development specialists, and policymakers. there is also work to be done in mitigating the impact of unavoidable foreclosures on consumers and communities. families who cannot sustain homeownership will need to find new places to live, highlighting the critical need for an adequate supply of affordable rental housing. consumers going through foreclosure typically will see their credit scores drop, raising longer - term questions about their ability to rebound financially and perhaps pursue a more sustainable home purchase at some later point. high numbers of foreclosed homes in some communities also raise challenges, and perhaps opportunities. because vacant homes, in particular, impose real costs on neighborhood and communities, forward - looking strategies to keep these homes occupied are important ( apgar and duda, 2005 ). some efforts are underway to prevent vacancies, as well as return vacant properties to active use ; some of these efforts may also help preserve the supply of affordable housing in areas that have experienced shortages. 7 the federal reserve has recently undertaken a joint effort with neighborworks america to help communities develop strategies for neighborhood stabilization. conclusion it is clear that rising home foreclosures and delinquencies significantly challenge many consumers and communities, and i hope i have conveyed today that the federal reserve is strongly committed to fully employing our authority, expertise, and resources to help alleviate their distress. we will continue to collaborate at the national, regional, and local levels with other stakeholders in the public, private, and nonprofit sectors to help to avoid preventable foreclosures and to address the consequences of the foreclosures that occur. in

ben s bernanke : fostering sustainable homeownership speech of mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the national community reinvestment coalition annual meeting, washington dc, 14 march 2008. * * * this audience, the national community reinvestment coalition, is certainly aware that mortgage delinquency and foreclosure rates have increased substantially over the past year and a half. this increase reflects significantly, though not exclusively, a sharp deterioration in the performance of subprime mortgages, particularly those with adjustable - rate features. at the end of last year, more than one in five of the roughly 3. 6 million outstanding subprime adjustable - rate mortgages ( arms ) were seriously delinquent, meaning they were either in foreclosure or ninety days or more past due. 1 that rate is about four times higher than it was in mid - 2005. lenders initiated roughly 1 - 1 / 2 million foreclosures last year, up from an average of 950, 000 in the preceding two years. more than one - half of the foreclosure starts in 2007 were on subprime mortgages. behind these disturbing statistics are families facing personal and financial hardship and neighborhoods that may be destabilized by clusters of foreclosures. these realities challenge us to find ways to prevent unnecessary foreclosures. and, looking toward the future, they challenge us to ensure a regulatory environment that promotes responsible lending and sustainable homeownership. i would like to briefly discuss how we arrived at where we are today. then i would like to share with you what the federal reserve is doing to reduce foreclosures, to protect aspiring homeowners from unfair and deceptive practices, and to equip them to choose wisely from among the often confusing array of mortgage options. in particular, i would like to highlight the new regulations we have proposed under the home ownership and equity protection act ( hoepa ). origins of the subprime mortgage turmoil over the past quarter century, advances in information technology, the development of credit - scoring techniques, and the emergence of a large secondary market, among other factors, have significantly increased access to mortgage credit. from 1994 to 2006, subprime lending increased from an estimated $ 35 billion, or 4. 5 percent of all one - to - four family mortgage originations, to $ 600 billion, or