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The foreclosure crisis is now having dramatic effects throughout America. In mid-2008, recognizing that this phenomenon was still quite new, the Open Society Institute asked the Urban Institute to scan available research to document what we know about: (1) the way foreclosures impact families; (2) how foreclosures affect communities; and (3) the efforts now underway, or being suggested, to address the crisis, focusing on actions at the local level. This report presents the results of this review. A final section offers the authors' recommendations on priorities for additional research to fill important gaps in the knowledge base.
This decade may well turn out to be the most tumultuous in the history of U.S. housing
markets. The period from 2000 to 2006 saw an unprecedented acceleration in home
prices almost everywhere, and homeownership expanded markedly as access to
subprime loans and other factors made it much easier for lower-income families to
purchase a home of their own. Then it all fell apart. Prices in most regions have since
plummeted and foreclosure rates have increased dramatically. Almost all American
communities are affected, but levels of foreclosure are much higher in some
neighborhoods and metropolitan areas than others.
Recognizing that this turnabout was still quite new, in mid-2008 the Open Society
Institute asked the Urban Institute to scan available research and other sources to
assess how much we now know about the way foreclosures impact families and
communities, and then to offer initial suggestions on what the findings have to say about
the need for additional research and about how to address the crisis at the local level.
Doing the latter required that we also devote some attention to available information on
the efforts now underway to respond to the foreclosure crisis in various metropolitan
This report is one of the outputs of this work. It attempts to distill the important findings
and recommendations from the review in a manner that will be useful to local leaders
and practitioners working on the issue in their own communities. Local practitioners are
likely to be most interested in ideas about how to address the crisis, but boiling down a
better understanding of the impacts should also be useful to them, both in designing a
strategy that fits local conditions and in motivating local decisionmakers to provide
Accordingly, this paper has three main sections: impacts on families, impacts on
communities, and the foreclosure response system. A final section offers the authors’
views on priorities for further research in these areas. The contents of the first three
main sections are as follows:
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