NATIONAL HARBOR, Maryland - The recovery of many U.S. low income areas remains stymied as lenders decide completing some foreclosures simply isn't worth the cost, casting many properties into legal limbo, Federal Reserve Governor Elizabeth Duke said on Wednesday.

Duke did not directly comment on the outlook for the economy or interest rates in a speech on neighborhood stabilization to NeighborWorks, a nonprofit economic development organization.

However, she said much remains to be done to stabilize communities hit hard by high rates of foreclosure.

Many community organizations have been frustrated by the difficulties of working with mortgage lenders and servicers, and these problems are even more exaggerated in weaker market cities, Duke said in prepared remarks.

Employers have cut 7.2 million jobs since the deep recession began in December 2007, and more than 2 million homes have been lost to foreclosure during the crisis.

In some neighborhoods, lenders do not even complete foreclosures because the cost of the process exceeds the value of the home, Duke said.

Anecdotal evidence suggests that these 'toxic titles' have placed significant numbers of properties in a difficult state of legal limbo, she said.

The Fed has stepped up meetings with community groups in the wake of the financial crisis after criticism its rescue efforts were directed at Wall Street while neglecting economic pain on Main Street.

Some lawmakers fault the Fed for regulatory lapses that contributed to the reckless practices that set the stage for the financial crisis. Congress is contemplating regulatory reforms that could strip the Fed of its authority to set and oversee consumer financial protection rules, among other changes.

We continue to engage in a good deal of outreach to stay informed about the challenges facing communities as this crisis evolves, Duke said.

(Reporting by Mark Felsenthal; Editing by Neil Stempleman)

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