Not only are foreclosures unhealthy for the economy, apparently they can be unhealthy for people as well. At least unhealthy enough that, in an unprecedented move, California State Commissioner of Financial Institutions, Michael A. Kelley, sent out an official notice last Tuesday requesting that all state licensees in the financial services industry clean up any stagnant water located around vacant properties — many of which are foreclosures.

So far in 2007 four people have died from West Nile Virus — two in Kern County, one in San Joaquin County, and one in Colusa County — prompting Gov. Arnold Schwarzenegger to declare a state emergency in counties hardest hit by the mosquito-carried disease.

Anything from a small puddle to pools, spas, waterfalls, ponds and other water features can become active breeding grounds for mosquitoes if left alone for a month or more. One of the downsides of taking back foreclosed properties for the lender is the obligation and cost associated with managing those REOs — some of which are bound to be vacant for a while, especially with the extended time it is currently taking to sell real estate in the Golden State.

Although West Nile Virus in particular may not be a nationwide medical crisis at the moment, this is a case where investors looking to purchase foreclosed properties which have sat vacant for some time would do well to have a property inspector come in and check out any water features the property may include.

Stagnant water and disease/bacteria have never been a good mix. And a sharp investor will include any cleanup of water features in the cost to rehab the property, no matter if the investor intends to flip the property or hold it and rent it out.

In the meantime, California’s Department of Financial Institutions is asking the CEOs of all industry members to help stop the spread of the virus by draining the water at all vacant properties currently under their management.

Look to the News and Events page of the RealtyTrac website and the ForeclosurePulse blog for future updates on this and other foreclosure-related news.