posted July 11, 2007 09:28 AM         

By Maya Roney, BusinessWeek

The mortgage mess is getting even messier. Literally.

Malnourished and flea-ridden animals, feces-covered floors and urine-soaked furniture, piles of rotting garbage, swarms of diseased mosquitoes -- these are the horrors that may await the sheriff, property inspector, real-estate agent or passer-by making that first visit to a deserted home.

With foreclosure activity well above last year's levels and still on the rise in many parts of the country, nasty surprises like these have become more common. In April, there were 147,708 U.S. foreclosure filings -- default notices, auction sale notices and bank repossessions -- down 1% from the previous month but still 62% higher than a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.

"It's almost every day now that we see a (foreclosed) house in awful condition," says Scott Mitchell, the president of National Property Inspections, a company that provides home inspections and assessments in the Las Vegas area. "We've really noticed it increasing in the last month and a half."

RealtyTrac estimates that Nevada had the highest foreclosure rate in the country in April, with one filing per every 232 households.

Homeowners who don't care anymore

"They know they are going to lose their house, so they have no pride of ownership anymore," Mitchell says. "They'll leave the water on, so there's flooding and mold everywhere. They'll tear the chandelier or the ceiling fan out of the ceiling, kick the doors and walls in. Then the critters start taking over -- ants, scorpions and black widow spiders."

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In and around Sacramento, Calif., mosquitoes that may carry the deadly West Nile virus are thriving in the thousands of uncared-for swimming pools on properties left vacant by slower home sales and rising foreclosures. With 30,505 foreclosure filings reported in April, California documented the largest foreclosure total in the country for the fourth month in a row, according to RealtyTrac. In Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, more than 1,500 homeowners handed their homes over to lenders in the first three months of 2007, according to DataQuick Information Systems in La Jolla, Calif.

Sometimes, frustrated homeowners get creative. A man in Eagle Creek, Ore., recently put three 200-pound pigs in his repossessed home. They quickly tore up the place, ripping away the foundation and reducing the back porch to rubble. When police found the pigs, the animals were unharmed but a little cranky.

Pets left for dead

Many animals are not so lucky. Pets are often silent sufferers during the foreclosure process. Homeowners in financial straits may make them a low priority to begin with, and when foreclosure leads to eviction, they are sometimes abandoned without food or water and left to breed uncontrollably.

In May alone, authorities found 23 abandoned animals in a house in Lake Carmel, N.Y.; 20 birds in a Lorain, Ohio, house; 24 horses on a Bixby, Okla., property; and more than 60 cats in a home in Cincinnati. All of these properties were in foreclosure, and most of the animals were injured, infected, dehydrated and starved nearly to death.

"There are a lot of hoarders and neglected animals and people who just don't realize how fast things can spin out of control," says animal rescue worker Gail Silver, who discovered the cat-filled home in Cincinnati.

On May 1, Silver was on her usual bike ride when she decided, suddenly, to turn down a road she hadn't been down in two years.

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"Something said I should go down this street," she recalls. On the street was a house with a bunch of cats sitting on the porch. "They did not look good."

Neighbors told Silver that the owner had been evicted two weeks earlier and that representatives from the local chapter of the Society for the Prevention of Cruelty to Animals (SPCA) were scheduled to come the next day to take away the cats and euthanize them. Silver decided to look inside the home.

"When I saw what was in that house, I was sick to my stomach," she says. "They were everywhere . . . tiny little babies that weren't even weaned yet, with bulging eyes. The house was filthy; you could smell the disease. I had to wear a mask in there -- it was so toxic."

A bigger burden

Local rescue agencies got involved, bargaining with the SPCA and the bank for more time to round up the cats and kittens. The house was scheduled to be cleared out completely a week later, on May 8. But Fannie Mae, the government-backed home-mortgage giant, intervened and extended the date to May 25.

A national organization, United Animal Nations, provided a grant to assist with emergency medical expenses for the sickest cats. The Cincinnati SPCA donated $1,000. Eventually, the team was able to remove all of the animals. Six cats have died; others are living in shelters and foster homes, but the organizations still need more money and help.

Foreclosure activity in Ohio surged in April, up 39% from March and 135% from April 2006, pushing the state's total to the third-largest in the nation. That's 11,431 filings, or one filing for every 418 households -- 1.9 times the national average of one filing for every 783 households. For the thousands of Ohioans and others struggling to find money for food and shelter, pet care is often the last thing on their minds. "They spiral down, and financially and in their personal life, everything just falls apart for them," says Anita Barron of Pet Alliance, the rescue group taking care of administrative work for Cincinnati's "foreclosure cats."

Resources for pet owners

If you're facing foreclosure and are unable to care for your animals, call a shelter such as the Best Friends Animal Society.

Spaying or neutering your pets will save you money in the long term because a female cat can have a litter of as many as seven kittens up to three times a year -- that's a lot of extra cat food. Spay/USA is a nationwide network and referral service for affordable spay and neuter services with a hot line (1-800-248-SPAY). Surgery at one of the clinics in the network averages $50, about half of the average cost in a vet's office.

"So many problems are very complex; this is a simple problem," says Spay/USA founder Esther Mechler. "And it's scary to think that with rising foreclosures, these animals will be some of the hidden victims."