Some folks celebrate their last home mortgage payment by setting fire to their loan agreement. Lately, some people behind on their mortgages are simply setting fire to their homes.
In what appears to be the latest symptom of the nation's mortgage meltdown and credit crisis, insurers, law enforcement officials and state agencies nationwide report a jump in home and automobile fires in the last year believed to have been set by owners unable to pay their debts. The numbers are small, but they're leading the insurance industry to scrutinize more closely what seem to be accidental 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-area couple were arrested on allegations that they burned their Jeep and drove their Nissan pickup into a river, then filed fraudulent insurance claims. According to investigators, the wife admitted she was trying to escape her $600 monthly car payment.
On April 1, police arrested a woman in Easley, S.C., accused of deliberately setting fire to her home just three days after the bank hung a foreclosure notice on her door. And in January, an Omaha man was arrested on suspicion of arranging to have his three-bedroom house burned down as he was facing foreclosure.
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 the special investigations unit at Bristol West Insurance, part of Farmers Insurance Group. "What is happening is terrifically economically driven."
These financially motivated fires are surprising some officials because they come after a decade-long decline in overall arson rates nationwide. Few state or federal agencies categorize arson in terms of the financial status of liens on the property, making nationwide figures elusive. Still, pockets of the country are showing a significant increase.
Insurers referred 14 cases of questionable home fires, with foreclosure as a possible factor, to the California Department of Insurance last year, up from seven in 2006 and two in 2005. In the same three-year period, reports of auto arson increased by a third, to 343 cases last year. On Friday, the Department of Insurance announced the arrests of seven people in two investigations of possible automobile arson and insurance fraud.
In Ohio, the total number of reported "auto owner give-ups" -- insurance jargon for fraudulent car fires and staged car thefts -- rose 150% from 2005 to 2007, to 245 cases last year.
Insurers say they're meeting this month with California investigators to discuss potential fraud during last fall's wildfires -- including the prospect that some of the 2,000 burned homes were in fact cases of opportune arson by owners. State Insurance Commissioner Steve Poizner acknowledged that 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 being seized by the bank.
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 ultimately 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 gutted house was eventually sold for $40,000.
Arson of all kinds has been on the decline for years. According to the FBI, total cases of arson fell 9.7% in the first six months of 2007 compared with the same period in 2006, and U.S. Fire Administration statistics show that arson declined by 60% from 1997 to 2007.
In the current economic environment, the temptation to commit arson can be too much for some. There were 2.2 million foreclosures last year, up 75% from the previous year, according to RealtyTrac. In addition, a study by Moody's Economy.com and Equifax found that 4.5% of all mortgages were delinquent in the first quarter of 2008. Auto loan delinquencies hit a 10-year high in January.
Frank Scafidi of the National Insurance Crime Bureau, a membership organization that tracks insurance fraud, says his group has not identified a rise in financially motivated arson. "Everything we've found does not support that," he said.
But some observers say state authorities and insurance companies play down the issue -- perhaps out of fear of copycat crimes.