Foreclosure was like a foreign word to the folks in rural Maine.

Auctions, short sales and real estate-owned sales happened in overbuilt, high-growth cities such as Las Vegas and Phoenix — they seemed out of place in a small state that prides itself on "the way life should be" and subscribes to a wilderness philosophy of "slow to grow."

"Mainers don’t default (on loans)," said Jim Gulnac, planning and community development director in Sanford, a southern Maine town of 21,000 people.

Editor’s note: The foreclosure crisis is reshaping cities and towns across America. Planners are taking note of contributors to the current problems and are taking action to address the crisis while avoiding such massive fallout in future real estate market downturns. This three-part series focuses on the how the foreclosure wave has hit suburbia, urban communities and rural communities and how they are responding to the challenge.

Foreclosure was like a foreign word to the folks in rural Maine.

Auctions, short sales and real estate-owned sales happened in overbuilt, high-growth cities such as Las Vegas and Phoenix — they seemed out of place in a small state that prides itself on "the way life should be" and subscribes to a wilderness philosophy of "slow to grow."

"Mainers don’t default (on loans)," said Jim Gulnac, planning and community development director in Sanford, a southern Maine town of 21,000 people.

But they have defaulted — a sign the mortgage crisis has arrived in rural America.

Maine exurbs such as Waterboro are suffering the same symptoms that plague much bigger cities from California’s Central Valley to Florida’s southwest coast. Growth has virtually ground to a halt.

"Rural areas are seeing a lot of the same problems, although price declines are probably not as dramatic (as in urban areas)," said Casey Dawkins, co-director of the Metropolitan Institute at Virginia Tech University in Alexandra, Va.

Certainly this is uncharted territory, especially for Waterboro and nearby Sanford, which play a big role in making York County the most distressed housing market in the state.

"This whole foreclosure issue … is new to Maine," Gulnac said.

Experts, though, say the economic downturn and mortgage crisis could prove to be the wake-up call for Maine government leaders and community members, forcing them to embrace new planning ideas for mapping out the future for housing and economic development.

Waterboro town planner Tom Ursia said the community would become "more vigilant in how we tackle subdivisions and growth patterns."

The first task is getting a handle of the current problem. Officials had to wait for the spring weather to melt the snow piles and let them get a better look at the condition of empty houses.

"We don’t have large condo (developments) or subdivisions that have emptied out. Here it is more scattered," said Charles Colgan, chairman of the community planning and development program at the University of Southern Maine.

"It’s a moving target. It changes by the day," Ursia said.

One thing is certain. In the coming year, Waterboro and Sanford will tap into the state’s $19.6 million share of federal Neighborhood Stabilization Program funds. The two towns are teaming up to spend $2.1 million to buy and renovate high-risk foreclosed houses and then sell them, especially to first-time homebuyers. …CONTINUED

"The idea here is to preserve and protect the neighborhoods. We’re going to do one or two houses at a time for each agency," Gulnac said.

For the most part, Maine is in fairly good shape nationally, ranking 39th in the country in February foreclosure filings, according to RealtyTrac. Still, foreclosure activity was up nearly 29 percent from the previous year, practically mirroring the national trend.

By far, York County leads the state in foreclosures, recording 40 percent of the 261 new filings recorded statewide in February. Waterboro is considered one of the state’s most distressed markets.

For years, Waterboro represented a mecca for homebuyers priced out of Maine’s coastal communities and Portland. Many families were attracted to the town’s Lake Arrowhead community, a 3,200-lot subdivision surrounding a pine-studded 2,600-acre, man-made lake.

"There was a fair amount of development going on in the rural part of the region," said Paul Schumacher, executive director of the Southern Maine Regional Planning Commission. Waterboro "was a place where a young family could afford a house."

It was 40 years ago when a development company purchased land on the eastern shore of Lake Arrowhead and started to sell lots for vacation homes. The town had no planning board at the time to watch over speculators as they carved out parcels.

"There is a mindset in rural New England: ‘This land … is mine and I can do anything I want,’ " Gulnac said.

By 1980, only 82 homes were built around the lake. Ten years later, home construction started to take off and the town issued 80 percent of its new building permits for projects in the subdivision. The growth spurt put a strain on the local elementary school and by 1990 it forced the town to boost property taxes by 8 percent.

In the past two decades, Waterboro’s population surged 60 percent to more than 7,200. Today, about 1,300 homes are spread around lake.

When the economy was humming and gasoline prices held steady, Waterboro residents could afford to travel to job centers in Portland some 30 miles northeast or head south to Boston 80 miles away. But a spike in home heating costs, $4-a-gallon gasoline and recession-related job losses put commuters living in these rural outposts in a financial bind.

"The mortgage crisis has certainly impacted young buyers. A lot of people foreclosed on and with short sales are under 45 years old," said Julie Bayley, owner of Bayley Realty Group and Lake Arrowhead Realty Group.

"Planners are going to have to deal with an aging and vacant housing stock that they didn’t have to (before)," Colgan said. The same is true for half-empty strip centers that fell victim to recession. …CONTINUED

"Some of these small shopping centers and even some big-box stores on the outskirts of smaller cities all of the sudden were vacant — not enough retail business to keep them alive," Colgan said.

When the economy eventually recovers, Waterboro will be poised to grow again. But Bayley and local planners say rural communities will need to look at smarter comprehensive planning, including approaches to create jobs closer to home. For the first time, Waterboro is assembling an economic development committee.

"The job market has to increase. You have to come up with a strategic plan. You have to get a general consensus from all the people that this is how (the town) is going to look. It’s a struggle," Bayley said.

Colgan said local governments will look to redirect growth toward existing facilities. "I’m not sure we will see the outward pressure again."

Experts say towns will have to look at multifamily projects in shuttered old textile mill plants, consider tax credits for affordable housing projects, and convert vacant storefront properties to nonretail uses such as social services or community centers.

Sanford, for example, has a mixed-used development in a former mill ready to go. It is waiting for the financial resources to move forward.

Maine officials say traffic impact ordinances, transit hubs and contract zoning for planned unit developments are planning concepts that are going to be a new part of the rural planning lexicon.

New housing ideas and change aren’t always embraced quickly in Maine. For example, a Sun City-like 100-unit project with age restrictions hasn’t sold a single unit. The "gated community has not caught on," Gulnac said.

For generations, Maine has been rather homogenous, and resistance to new initiatives is natural, local officials say. But times are changing because of an influx of new folks.

"Things didn’t change for a few hundred years. We are now facing diversity," Gulnac said. "We try and wrestle with change."

The mortgage crisis could be a compelling reason for Mainers to accept a new direction.

Gilbert Mohtes-Chan is a freelance writer in California.

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