It's easy to spot the effects of the recent recession while strolling through Elk Grove neighborhoods: the telltale vacant homes with boarded-up windows, weeds in the front yards and the heavy padlocks on the doors.

The city is one of the hardest hit by home foreclosures in the region.

But 15 of these homes have been spruced up and are being sold to buyers who otherwise might struggle to find a nice house for a decent price. The city has one of the most active programs for using federal stimulus funds to turn weathered bank-owned homes into beacons of hope for low- and very low-income families.

The funds, coming from the federal Neighborhood Stabilization Program, were given to communities that have suffered high rates of foreclosures, said Emilee Ford, real estate projects director for NeighborWorks, a nonprofit home ownership center shepherding the projects for the seven-county Sacramento region.

"The idea is to let jurisdictions tackle bank-owned properties that are vacant," Ford said. "We buy the vacant houses, renovate them, and sell them to homeowners."

Elk Grove received $2.4 million in federal money in 2008 for fixing up and reselling foreclosed homes, said Sarah Bontrager, the city's housing program manager. The money was allocated based on the percentage of foreclosed homes in particular areas.

"Like a lot of jurisdictions with newer homes, Elk Grove was one of the areas harder hit," Bontrager said.

There are currently 967 bank-owned properties in Elk Grove, but only 229 listed on the market, she said. Many banks hold onto homes after foreclosure to avoid flooding the market.

The number of bank-owned properties is down from 1,126 in August 2009, she said.

The U.S. Department of Housing and Urban Development estimated there were 2,657 foreclosure starts in Elk Grove between January 2007 and June 2008.

The city used about $540,000 of its allocation for a down payment assistance program, which gave low-income buyers up to $60,000, or 20 percent of the purchase price. The popular program ran out of funds in June 2010 after helping finance 15 homes, and the city is applying for more.

The bulk of the remaining money, about $1.9 million, went to the city's Acquisition/Rehab/Resale program, which acquires homes that are in poor condition and have been determined to cost more to fix than the market will bear, Bontrager said.

The city partners with developers to buy and rehabilitate the homes, then the city reimburses developers for the costs of renovation and pays them a flat fee of $20,000.

If the sale of the house yields any profit, it is rolled back into the program for buying more homes, Bontrager said.

The renovations often transform depressed properties into real estate gems, she said. The work can include new roofs, appliances, heating and air-conditioning systems, plumbing, paint, carpeting and even kitchen cabinets.

"We understand a lot of our buyers don't have the cash to fix up a house once they buy a home," Bontrager said. "All of the homes we buy are in pretty poor condition."

The city currently has six newly remodeled homes available, ranging in price from $55,100 for a two-bedroom condominium to $164,000 for a three-bedroom home. Down payments range from $4,000 to $7,000, and monthly payments would range from $650 to $1,100, in many cases less than renting a home in Elk Grove, Bontrager said.

Buyers need to be first-time homebuyers, meet income restrictions, and be able to qualify for a mortgage loan. The city offers a 3 percent closing cost grant for homes in the program.

Ford said NeighborWorks has bought, upgraded and sold a total of 56 vacant homes in the Sacramento region using federal funds, with 30 of them in the city and county of Sacramento.

Information on the Elk Grove homes is at egplanning.org/housing.

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