The nation has spent too little time on community problems that have arisen from the country’s housing crisis, the CEO of the Boston Federal Reserve said at a national summit about REO and vacant property issues.

“Rather than treating the symptom — the high REO problem — we need to better understand how to resolve the more general problems in communities that lead to higher concentrations of REOs and exacerbate the effects of high REOs,” said Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston.

Rosenberg made his comments during a two-day Federal Reserve summit that began Tuesday in Washington.

“Do we need more holistic approaches to addressing this crisis? Should there be more state and federal revenue sharing focused on providing flexible funds to the communities most affected?  My answer to both of these questions is a yes. But I would also argue that we need to not only explore alternative solutions, but also do a much better job of establishing which solutions work.”

It’s important to consider how the foreclosure problem should be framed, he said, bringing forth three different existing views among housing and policy experts:

1. If it is “a foreclosure and REO problem rooted in the housing bubble, the solutions will tend to emphasize mitigating the foreclosure problem or accelerating the disposition of REO properties,” Rosenberg said.

2. If it’s defined as a housing problem, then the country “might focus on solutions that result in sustainable home ownership … focusing on financial education, addressing predatory home financing and redefining appropriate underwriting standards.”

3. If viewed through the community lens, issues such as code enforcement, unemployment and crime must be addressed in neighborhoods disproportionately affected by foreclosures.

The current crisis, Rosenberg said, contains elements of all three frameworks. “This is a foreclosure problem. This is a housing problem. This is a community problem,” he said.

Not surprisingly, New England ZIP codes with a high concentrations of REO properties have suffered larger declines in home prices than ZIP codes with lower REO concentrations, he said. Communities that faced challenges before the foreclosure crisis made them more likely to suffer disproportionately the consequences of the crisis, Rosenberg noted. (Click chart to expand view.)

ZIP codes with four or more REOs per square mile have higher property crime rates, higher rates of low birth-weight babies, higher unemployment rates, weaker small business activity and higher school dropout rates.

“This is not a one-size-fits-all foreclosure or housing problem; these are community problems,” he said.

Rosenberg said he’s encouraging the Boston Fed to look at how REOs can exacerbate problems in troubled communities look for solutions to address these neighborhood issues.

Write to Kerry Curry.

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