Some folks celebrate their last home mortgage payment by setting fire to their loan agreement. Lately, people behind on their mortgages are setting fire to their homes.
In what appears to the latest symptom of the U.S. mortgage and credit crisis, insurers, law enforcement agencies and state agencies nationwide have reported a jump in the past year in home and automobile fires set by owners unable to pay their debts. The numbers are small but are leading the insurance industry to scrutinize more closely what seem to be routine blazes.
"We've seen a dramatic increase in this kind of fraud," said Dan Bales, director of fraud investigations at Mercury Insurance. "People upside-down on their house with variable-interest-rate loans, or upside-down on their cars are pretty quick to burn their property right now."
Last week, a Sacramento, Calif.-area couple were arrested on charges that they burned their Jeep and drove their Nissan pickup into a river, then filed fraudulent insurance claims. The wife admitted that she was trying to escape from her $600 monthly car payment, investigators said.
Three weeks ago, police arrested a woman in Easley, S.C., and accused her of deliberately setting fire to her home three days after the bank hung a foreclosure notice on her door.
In January, an Omaha, Neb., man was charged with arranging to have his three-bedroom house burned down to avoid losing it to the bank.
The fires are keeping fraud investigators such as Anne Luce occupied. "I'm busier now than a one-armed paper hanger," said Luce, who works on auto cases for Bristol West Insurance. Such financially motivated fires are surprising some officials because arson rates overall have been declining for a decade nationwide. Few state or federal agencies categorize arson in terms of the financial status of liens on the property, making nationwide figures elusive. Still, some areas of the country are reporting significant increases.
Insurers referred 14 cases of questionable home fires with foreclosure avoidance as a possible motive to the California Department of Insurance last year, up from seven in 2006 and two in 2005. In the same period, reports of auto arson increased by one-third, to 343 cases last year.
In Ohio, the number of reported "auto owner give-ups" - insurance jargon for fraudulent car fires and staged car thefts - rose 150 percent from 2005 and 2007, to 245 cases last year.
This month, insurers say, they are meeting with California investigators to discuss potential fraud during last fall's wildfires, including the prospect that some of the 2,000 burned homes were cases of opportune arson by owners looking to escape from their mortgages. State Insurance Commissioner Steve Poizner said his agency was investigating a number of such cases but would not provide further details.
One recent fire of note was set in September in Gaines Township, Mich., by Sheryl Christman, who hoped to use the insurance money to get out of a troubled marriage, not to mention a house that was four days from foreclosure.
The 38-year-old mother ignited a mattress in the garage of her two-bedroom home, for which she had paid $150,000 in 2006, then sat outside as the house burned. She was arrested, convicted and sentenced to 1,000 hours of community service and five years of probation. In interviews afterward, Christman called her actions "rash and stupid" and said she was "very ashamed." The heavily damaged house eventually sold for $40,000.
Arson of all kinds has been declining for years. According to the FBI, arson cases fell 9.7 percent in the first six months of 2007 compared with the corresponding period in 2006.
U.S. Fire Administration statistics show a 60 percent decline from 1997 to 2007.
In areas where property values are falling, arson can be tempting because fire coverage is usually tied to the value of the mortgage rather than to the home's appraised value.
Ken Bensinger writes for the Los Angeles Times.