50, 000, a nearly 30 percent drop in value. the loss of equity due to neighboring foreclosures represents a very real concern for homeowners, particularly older homeowners who might have expected that home equity would serve as a cushion in retirement. but interestingly, yvonne means wasn ’ t focused on her financial loss nearly as much as she was her social loss. ms. means told the interviewer that she no longer invites friends over to her home because of her embarrassment about the condition of her street. i have visited the southeast side of cleveland and have seen first - hand the challenges faced by homeowners. there is a large inventory of homes that have gone through the foreclosure process and are now owned by financial institutions. these properties are often referred to as reo, or “ real estate owned, ” which is how they are recorded on bank balance sheets. our conference publication includes an article by frank ford, of cleveland - based neighborhood progress, inc., that paints a very troubling picture of the impact of a large number of foreclosures in a once vibrant community. ford estimates that every blighted house in cleveland can negatively impact five or six other houses near it. homeowners in close proximity to foreclosures experience even greater losses in value than the general price declines that occur as a market absorbs a large number of distressed sales. with an estimated 11, 500 vacant houses in cleveland, ford calculates that some 60, 000 occupied homes will likely be impacted. 1 even worse, as he explains, is that losses don ’ t stop at home equity : tax revenues decline and along with them the financial support necessary to provide for another analysis of the impact of vacant properties on the value of occupied homes, see the paper by brian mikelbank, “ spatial analysis of the impact of vacant, abandoned and foreclosed properties, ” federal reserve bank of cleveland, november 2008. mikelbank finds that vacant properties have a significant impact on the home values of neighboring properties. for public schools, police, fire, and social services. neighborhoods that were once vibrant have, in many cases, become blighted, and the resources necessary to address the problem are scarce. the challenges associated with reo are not exclusive to older cities, such as cleveland or detroit, where economic forces have long threatened the sustainability of large infrastructures that support fewer residents. carolina reid, of the federal reserve bank of san francisco,

elizabeth a duke : stabilizing neighborhoods – lessons learned from the field speech by ms elizabeth a duke, member of the board of governors of the federal reserve system, at the federal reserve real estate owned ( reo ) and vacant properties summit, washington dc, 1 september 2010. * * * good morning. i want to welcome you to the federal reserve board for this two - day summit to examine the problems associated with vacant and abandoned property and to explore innovative approaches to neighborhood stabilization. we are certain to have an informative and thoughtful discussion of these issues as our agenda is full of experts, including shaun donovan, secretary for the department of housing and urban development, who will deliver a keynote address. like you, i am anxious to get started. but before i begin, i would like to recognize and thank the speakers and panelists we will hear from during the conference. i would also like to acknowledge those who contributed to the new volume of papers the federal reserve published in conjunction with this event. many of our panelists contributed to the volume ; their articles give us a look at the issue from every angle, provide great insight, and offer promising solutions. and i would note that a number of participants and contributors are current or former members of the federal reserve consumer advisory council ( cac ). the cac has been instrumental in furthering our understanding of emerging consumer and community issues, including the topic that brings us together today. finally, i would like to thank the federal reserve staff that worked tirelessly on this project. when it became apparent in 2007 that foreclosures were reaching epidemic levels in cities nationwide, the first priority of many community organizations and their public and private partners was to identify ways to mitigate the impact of foreclosure on individual homeowners and their families. to assist in these efforts, the federal reserve deployed a number of resources : we developed tools for community organizations to use in identifying areas with high default rates so that they could target their counseling resources effectively. we helped to organize many foreclosure assistance fairs that brought lenders, counselors, and other resources to individual borrowers. we created foreclosure toolkits for communities. we launched a public information campaign to warn consumers about foreclosure rescue scams. despite these and other efforts to help mitigate foreclosures, however, we also recognized that many homeowners would not be able to remain in their homes and that, in time, the community development