Mortgage Problems? Turn Your House into a Billboard

(Reuters) -- When they saw the house on El Dorado Drive in Buena Park, Calif., being painted a startling orange and green and giant billboards hung on the outside, Scott and Beth Hostetler's neighbors were initially angry and confused. Some even considered calling the police.

But what they witnessed on Friday was not an offensive redecoration decision by the Hostetlers, but rather the debut of one of the more unusual schemes to arise from the housing crisis. In return for allowing the front of their four-bedroom house to become a garish advertisement, the Hostetlers are getting their nearly $2,000 monthly mortgage paid by the marketing company behind the project, Brainiacs From Mars.

In a residential neighborhood without heavy traffic, cars passing by the house slowed and drivers gawked at the vivid colors and a giant Brainiacs From Mars billboard.

Romeo Mendoza, the company's founder and CEO, told Reuters that his ultimate goal is to turn 1,000 homes across the United States into giant advertisements for his marketing firm.

And in each case struggling homeowners will get their mortgage paid, for up to a year.

If we roll it out to scale and impact the foreclosure crisis, that would be amazing, Mendoza, 42, said.

Mendoza said he chose the Hostetlers because they are nice people and he wants to choose the most deserving cases rather than homes on the busiest streets.

Since he advertised the scheme on his website in April 2011, Mendoza says he has had 38,000 applications, from as far afield as Russia and Japan.

The Hostetlers, who are both deaf, were one of those applications and were informed three months ago that their home had been chosen to launch the scheme.

There are a number of issues that could prevent the idea from gaining traction, namely zoning laws and other city codes that limit where advertising can be placed and sometimes regulate other aspects of a home's appearance.

But Mendoza says the idea could help struggling homeowners who face being evicted from their homes through foreclosure, although the Hostetlers say they are going to use the money to pay down credit card debt.

Most of the 38,000 applicants have come from California, Nevada and Florida - the three U.S. states hardest hit by the foreclosure crisis triggered by the collapse in housing prices after the 2008 financial crash.

GRAFFITI OR GODSEND?

In southern California 44 per cent of homeowners are underwater, owing more on their mortgages than their homes are worth. In Buena Park, about one in every 270 homes has been foreclosed upon.

The response has been overwhelming, Mendoza says. People are hurting, and struggling to stay in their homes. If we can help some of them, that would be great.

Mendoza's plan is to advertise his company's name and its social media marketing tools on the front of people's homes. In return, he hopes the quirkiness of the scheme will convince companies to hire Brainiacs From Mars to run their advertising campaigns.

He says he is already negotiating deals with some big firms. The payments to homeowners for the initial experiments are being funded by profits from some of his company's other projects.

The reaction of the Buena Park city council, and some of the Hostetlers' neighbors, suggests that Mendoza could face a bumpy ride.

The Hostetlers' neighbors have been told that the house will only be a giant advertisement for a month. In fact Mr. Hostetler says he would like it to stay that way for six months.

Neighbor Vivian Largent said: If it's for a month, I'm ok with it. But no longer.

Echoing that sentiment, another neighbor, 80-year-old Bob Pancoast, said: All the neighbors were a little upset at first. We thought they had gone off their rocker. But I guess it's a good idea for them.

Mendoza said he had checked and that there are no restrictions in Buena Park on the colors homeowners can paint their houses. They can paint them multi-colors if they like, Mendoza said.

Fred Smith, who sits on the Buena Park city council, was surprised when told about the scheme - and not at all happy.

The color scheme was fine, he said. But the advertisements were another matter.

This does not follow with the city codes, he said. They are going to be in trouble. They need to go someplace else.

Charles Mclaughlin, a finance expert in the housing industry, said: I don't think the program will be a success. It will be akin to graffiti - that's how people are going to look at it. They are going to run into zoning problems everywhere.

Mendoza said: There are definitely zoning issues in some cities, and we realize that.

But we have really hit a nerve, and we can't let that stop us. Once people start seeing how it works, once they get it, the moment they realize it is paying people's mortgages, they are always on our side, because of this economy.

(Editing by Cynthia Osterman)