With millions of homes in foreclosure -- and millions more owners having difficulty paying their mortgages -- there's likely to be one in every neighborhood: the property that has gone to seed.

Maybe the green lawn next door that you once envied has turned an ugly brown because it hasn't been watered, or the flower beds have been overtaken by weeds that have grown up to the windows. Or perhaps the grass hasn't been cut in weeks, and the house is surrounded by what looks like a wheat field.

If the neighborhood eyesore has been abandoned, the house itself has probably deteriorated. The windows may be broken or boarded up, the gutters could be sagging, the garage door might be hanging off its frame, and the roof could be covered with debris.

Perhaps the place has been taken over by rodents. Or maybe the neighborhood kids are using it as a hangout. Worse, homeless squatters could be using it as shelter -- or drug pushers might be using it as their place of business.

It's not a pretty picture. Yet scenes like these are playing out everywhere. No neighborhood is immune, and the impact on local property values can be chilling, even when the distressed property is still occupied and well-maintained.

Research from the Federal Reserve Bank of Cleveland shows that neighboring property values sag by up to 3.9 percent when a nearby house is in the foreclosure process but still occupied. When the offending house is vacant and the taxes aren't being paid, the negative impact on neighboring property values can be twice that much.

"Vacant homes can be more than just an eyesore. They can have substantial negative impacts on the surrounding community, impacts that are felt most acutely by the neighbors and communities that must cope with the dangers and costs of vacant buildings," Federal Reserve Board governor Elizabeth Duke said in a recent speech in New York.

All of this raises the question: What can you do if you are trying to sell your house and a ramshackle property happens to be right next door -- or even down the street -- from your cream puff?

For starters, if the offending property is still occupied, try being neighborly by explaining your situation and offering whatever assistance you can. You might even enlist your real estate agent to help; after all, it's in his or her best interest, too. And sometimes agents can help organize a communitywide effort to help a distressed neighbor.

If you live in a community governed by a homeowners association, let the property manager or the association board know of your dilemma. Associations often will pay to cut the grass and correct visible exterior maintenance issues. The cost will become a lien on the offending property that will have to be discharged before it can be sold.

Homeowners are generally free to choose how their property looks. However, if your neighbor rejects your offer or otherwise refuses to bring the outside up to a reasonable standard, you may be able to prod the local authorities to force him to act. Many jurisdictions fine owners for not maintaining their properties. And with the foreclosure problem getting out of hand, some state and local governments have enacted ordinances that hold lenders' feet to the fire.

If the place is abandoned, you need to find the owner. That may or may not be your neighbor's lender, depending on where the property stands in the foreclosure process.

Several communities are enforcing vacant property registration ordinances that require lenders to secure and maintain the property and call for stiff fines and penalties if they don't, whether or not the foreclosure is completed. To force lenders to fix up houses that are in disrepair, for example, Chula Vista, Calif., requires holders of troubled mortgages to pay fees and post a bond for each such property. Springfield, Mass., and Albany, N.Y., also command that each foreclosed property be registered.

That's why Joseph Bada of default management company Five Brothers in Warren, Mich., says "lenders will do everything in their power" to help.

"The last thing (lenders) want is an unhappy neighbor," says Bada. "They are very concerned. They look for such calls. Then they notify us, and we go out and take care of it."

If you've still had no success, you might want to take matters into your own hands. Not by going onto the property or into the house without permission -- that could be considered trespassing, no matter how altruistic your intentions. Rather, by erecting an obvious border between your place and the rundown house next door.

That might be a fence or even tall shrubs to help block the view. Either one is a fairly fast fix that could be worth the investment, says Margaret Innis, who operates Decorate to Sell, a home staging company based in Andover, Mass.

"If you have a great neighborhood, you want your buyers to see it," Innis says. "But if the house next door is an ugly duckling, you really have to think on your feet."

One possibility is to try to make sure prospects use a route to your house that doesn't take them by the offending property. Another might be to put a water fountain on your patio table. Or install plantation blinds so that light can stream in but the view does not -- "anything," says Innis, "that you can do to minimize the distraction."

At the very least, laws in every state afford you the right to prune trees, shrubs and roots that cross the line and intrude on your property. But proceed cautiously. Don't just hack away. You can't wield an ax to everything you don't like.

Make sure you don't go over the property line, be careful not to prune so much that the plant dies, and clean up your mess. If the debris is on your side of the line, it becomes your responsibility, not your neighbor's.

Mortgage makers have always been a creative lot. But these days, credit unions seem to have supplanted traditional lenders as the most inventive.

Banks and mortgage companies are pretty much operating with one hand tied behind their back while they wait for regulators to lay down the law under the latest -- and much more restrictive -- legislation. But not credit unions, says Ed Roberts of the trade publication Credit Union Journal.

These not-for-profit institutions, which are owned and controlled by their members, had "much lower deficiency ratios" than banks during the mortgage meltdown, says Roberts. So they are "much more willing to experiment."

One of the most intriguing new products is a five-year, fixed-rate mortgage being offered by the National Institutes of Health Federal Credit Union, which serves biomedical and health-care professionals in Maryland, Virginia, West Virginia and the District of Columbia.

"We call it our 'Goodbye Mortgage' because it's perfect for our baby boomer members who want to get out of debt before they retire," says NIHFCU President Juli Anne Callis.

Say you're nearing the point when you're ready to slow down and enjoy the fruits of your labor, but you have a 10- or 12-year "tail" left on your current home loan. The loan is not throwing off the interest write-offs it used to, but you don't have enough cash lying around to pay it off.

Consider refinancing into a five-year, "see-ya" loan like the one offered by the NIH credit union. At today's record low interest rates, you might be able to cut the remaining term in half while paying no more than you were under your original loan.

Even if the payment is somewhat higher, Callis says, her members are going for it. They are at the stage in their lives when they have the financial wherewithal to pay a little more each month in order to be out of debt sooner rather than later.

"'How can we get out of debt by the time we retire?' is a constant theme we hear from our members," Callis says.

But the Goodbye Mortgage doesn't appeal only to empty nesters. Parents who want to dump their mortgage debt by the time their children reach college age also see the value of refinancing into a five-year loan.

Younger buyers who don't want to load up on debt are giving the loan a hard look, Callis says. And there's interest, too, among folks who want to pay off their loan on their primary residence sooner so they can buy a vacation home.

Shorter-term loans have always been available in the mortgage supermarket. While most people know about 15-year loans, few realize that lenders will sometimes go as short as 10 or even eight years. But five-year loans? They're practically unheard of.

What makes a five-year loan work, of course, is today's rock-bottom rates. Say you are on the back end of a 30-year, fixed-rate loan you took out 20 years ago at 7 percent. If you borrowed $200,000, your payment is $1,330.60, and your current balance is $144,602.

Roll that into a five-year loan at 2.5 percent and your payment would jump $703, to $2,033.88. But now you have a lot more discretionary income than you did 20 years ago, and if you throw that against your mortgage, you'd be debt-free in half the time.

"As long as you are in a position where the higher monthly payment is not going to affect your lifestyle, the Goodbye Mortgage works really well," says Mark Lawson, a NIHFCU loan officer.

Other credit unions are offering five-year adjustable-rate mortgages -- but with a twist. Whereas the typical five-year ARM resets annually after the initial five-year fixed period, the 5-5 adjustables offered by Affinity Federal in New Jersey and Alliance Credit Union in San Jose, Calif., and Wilmington, N.C., are 30-year loans that adjust only after every fifth year.

"For the past four years or so, it's been all about the 30-year fixed-rate mortgage. Adjustables had fallen off the map," says Jim Delyea of Alliance, which serves as a credit union for about 200 companies. "So we thought it was time to reintroduce it. It's almost like a new concept, it's been off the table for so long."

Both institutions are targeting their 5-5 ARM toward buyers who know they won't be staying in their homes for long periods, whose jobs dictate that they be able to move every seven to 10 years. It's more secure than a typical 5-1 ARM, says Delyea.

"You'll enjoy five years of low, locked-in payments, then an adjustment only every five years after that," the Alliance vice president says. "It's the perfect mix."

ARMs don't have a particularly great reputation, largely because rates can fluctuate so widely that borrowers could be hit with unexpectedly higher payments. But with a 5-5 ARM, even borrowers with longer-term horizons can anticipate what is coming and budget for it, says Affinity's Elizabeth McLaughlin.

At Affinity, New Jersey's largest credit union serving more than 2,000 businesses and organizations, the 5-5 ARM comes with a 3 percentage point cap at the first adjustment and a 2-point cap on subsequent resets. Over the life of the loan, the rate can rise by no more than 6 points.

These built-in protections are even better with Alliance's loan, which has 2 percentage point caps on each adjustment and a 5-point maximum over the 30-year term.

And, of course, if market rates should fall sometime over the life of the 5-5 ARM, there's always the possibility your rate could slide right along with them.

The product "is a good example of the financial industry finding better ways to execute a worthwhile concept rather than simply tossing it out entirely because there were problems associated with it," Alliance says on its website.

"Consumers did have problems with ARMs, but it didn't make sense to lock everyone into fixed-rate mortgages when ARMs could benefit a lot of homebuyers if they were merely structured a little differently to protect against high risks and extremes."

How can you make a billion-dollar mistake and still come out ahead? When you are a federal agency that botches payouts to financially strapped homeowners.

No, this is not a trick question. But it is the trick that the Department of Housing and Urban Development thinks it pulled off when it neglected to adequately supervise its Preforeclosure Sales Program, costing taxpayers millions of dollars.

According to estimates by HUD's own Office of Inspector General (OIG), the department paid out $1.06 billion in claims for 11,693 preforeclosure sales that failed to meet the criteria for participation in the program, which allowed borrowers in default to sell their homes at less than what was owed on them.

But here's the kicker: While HUD deputy assistant secretary Charles Coulter agreed that execution was "inconsistent," HUD maintained in a statement that "absent the short-sale option, many of the loans would have gone into foreclosure, resulting in a far more costly conveyance claim" to the government.

According to Coulter, the claims the OIG says were paid erroneously may have resulted in a net benefit to the government of as much as $170 million.

The inspector general, which is an independent audit and investigative office within HUD that promotes efficiency and roots out fraud and waste, sees it a bit differently.

While it is "reasonable to assume" that some of these loans would have gone into foreclosure, and therefore that the ultimate cost to the government would likely be more than the $1 billion estimate, the OIG says in its report, "It is also reasonable to assume that at least some of these would have resulted in no claim or reduced claims due to alternative loss mitigation procedures."

The OIG arrived at its estimates by examining a small but statistically selected sample of 80 claims made to the program during the 12 months ended Aug. 31, 2011.

During that time, the Federal Housing Administration, the agency within HUD that insures lenders against losses should borrowers default on their mortgages, paid claims on nearly 20,000 preforeclosure sales.

The audit focused on the 16,976 preforeclosure sales claims submitted by the nine largest lenders participating in the program. Of the 80 claims in the sample, 61 -- or 76.3 percent -- did not meet the rules.

Coulter took exception to the quality of the sample, noting that the borrowers had an average credit score of 596 and an average delinquency of 8.7 months.

Given this profile, he said, it is likely that most of the 80 loans would have gone into foreclosure had their borrowers not been allowed to take part in the short-sale program. And since the recovery rate is greater in the preforeclosure program, he added, the claims paid were lower than they might otherwise have been.

Whether you accept Coulter's reasoning or the OIG's, there seems to be no question that HUD failed miserably in enforcing the program requirements. As a direct result, borrowers who otherwise may have been able to sustain their obligations were inappropriately relieved on their debt using FHA insurance fund reserves.

Specifically, the OIG found that claims were paid to borrowers who:

-- Had at least $5,000 in cash assets. In some cases, borrowers had bank balances that could cover up to nine months' worth of house payments. Yet they weren't required to put those funds toward their delinquent balances, even when it would have brought them current.

-- Did not show they had experienced an adverse and unavoidable hardship. In one instance, the borrower claimed his income had been declining, when in actuality it was rising.

-- Did not live in the property. In some instances, the borrowers' tax returns listed the property as a rental for several years. In others, borrowers reported their properties as rentals to their lenders.

The report also noted that lenders failed to verify the borrowers' income or calculate it properly.

HUD paid by far the largest number of claims in instances where the lender did not adequately verify expenses and subtract them from income to determine if borrowers had enough surplus to pay at least part of what they owed under some kind of repayment arrangement.

"In nearly all cases," the OIG found, "expenses claimed by the borrowers exceeded those verified by the lender."

The investigation also found that in some cases, lenders calculated income based on the earnings of only one co-borrower or determined borrower income without actually verifying it.

The OIG recommends that HUD go after the lenders involved in the improper claims. But here's the other kicker: Many of them are going to skate.

Of the 61 bad claims, 55 were submitted by the five major lenders involved in the big national mortgage settlement. In exchange for providing $25 billion in relief for distressed borrowers, the five were pardoned for misconduct in loan servicing in the settlement with state and federal authorities.