In so many ways, foreclosure is an end. It's a bank's last resort, and the sad final chapter for a family sold on the American dream of home ownership.
But in another sense, foreclosure is also a beginning -- a never desirable, but often useful, tool that can help stave off neighborhood blight and create a path toward rejuvenation.
As much as everyone wants to avoid foreclosure, it does provide cities -- especially older ones with declining populations -- the legal means necessary for acquiring property that would otherwise become vacant or abandoned.
The trouble is that there's a stigma associated with foreclosure, and legislators can be swayed to impose restrictions on the process that make it more difficult for municipalities that want to reclaim and reuse property that has been left to decay.
So, from a policy perspective, what can be done to create better legal tools for clearing titles that don't depend solely on the self-interest of debt collectors? Here are some ideas proposed by Mary Helen Petrus, a researcher at the Federal Reserve Bank of Cleveland:
* Quiet title actions, in which governments go to court to "quiet" any and all claims to a property's title.
* Laws to facilitate nuisance abatement through receivership (giving courts the power to assign repairs or improvements to an overseer of a vacant property).
* New rules making it easier for willing homeowners to forfeit their properties so that governments can take stewardship.
* Processes for tax foreclosures that don't have to go through the courts.
This is not to say that foreclosure is always the best option. In viable neighborhoods, the most beneficial course of action is generally to focus on improving the quality and affordability of housing for the people who still live there. But when there's a breakdown, and there's no hope of rescuing properties from becoming vacant or falling into disrepair, foreclosure is often the most viable option.
This is especially true in American cities where joblessness is high, or the population is dwindling. In these situations, where there simply aren't enough homebuyers to purchase the number of homes available in a market, foreclosure can actually help begin the process of revitalizing neighborhoods. For more information on this subject, visit www.clevelandfed.org/pr/foreclosure.