The foreclosure crisis threatens not only the millions of homeowners faced with foreclosure but also the progress made in low- and moderate-income communities by Enterprise and its partners over the last 20 years. 

Vacant properties now held by lenders or servicers are commonly referred to as “real estate owned” properties, or REOs. Concentrations of REOs are a blight in communities. They depress property values, increase crime and lower the quality of life in the community. If left unaddressed they can trigger a reinforcing cycle of disinvestment, abandonment and decline in the community. Innovative programs that target and return concentrations of REOs to productive use are needed to address the glut of REOs before they destabilize communities.   

Past experience indicates that when the number of vacant homes reaches a critical mass, property values decline rapidly, demand for property in that community drops off and eventually disappears. Owner-occupants are usually the first group to be deterred by high vacancy rates. Investor speculators then typically replace these units with rentals.
 
Declining markets such as these tend to attract investors whose primary goal is short-term profits. Generally, investor-landlords have little invested in the broader community, which leads to landlord absenteeism and poorly maintained properties.

In some markets the level of vacancy and abandonment reaches the point where even investor-owners are not interested. At this point there is little to no demand for REOs, leaving them to sit and decay, further undermining confidence in the local real estate market and reinforcing the problem.

Neighborhood stabilization is about stepping into communities and addressing concentrations of REOs before the cycle reaches this point