Thread: Broke homeowners linked to arsons

Broke homeowners linked to arsons

Authorities in economically stressed cities see an increase in torched houses. Is the nation's mortgage mess transforming more Americans into criminals?

Arson is nothing new in Detroit. It's a time-honored weapon of the angry, vengeful, distressed and dispossessed in a city that gets hurt harder and sooner than others, making it a perfect place to spot early evidence of stress from the real-estate meltdown.

The Detroit Fire Department can't draw a definitive link between its rising arson rate (151 arrest warrants in 2007), rising foreclosures (up more than 65% last year) and falling housing prices (the region's median house price dropped 17.3% in the past four years, to $145,173).

But Capt. Steve Varnas of the department's arson section says he sees a connection: In 2005, the city issued only 80 arrest warrants for arson -- about half the number last year. "Things were going great," Varnas says. "There were fewer desperate people in 2004 and 2005."

Across the U.S., homeowners are searching for ways to escape from mortgages they can't pay -- or don't want to. A few are turning to arson, but it's too soon to turn anecdotes into meaningful statistics. Consumer pressure and state laws require speedy settlements, which means insurance companies are quick to pay up and slower to complete complex arson investigations. Definitive answers will come later.

But the signs of trouble are there if you're looking for them:

The FBI reportsthat arson grew 4% in suburbs and 2.2% in cities from 2005 to 2006. The 2007 numbers aren't out yet.

In California, a state hit particularly hard by foreclosures, insurance companies must tell the state within 60 days if they suspect a fire is "questionable." Last year, more than 120 reports were filed, and in 14 foreclosure was named a possible factor. The previous year, just 70 reports were filed, with seven citing foreclosure, says the state insurance commissioner's office. (Not all reports become arson cases.)

Arrest warrants for arson in Detroit rose 89% between 2005 and 2007. "We are up to our eyeballs in arsons," says Varnas, of the Detroit Fire Department. "We're not only dealing with hardened criminals. We're dealing with desperate people."

A trend -- or arson as usual?
In Stockton, Calif., where foreclosures are rampant, Deputy District Attorney J.C. Weydert is wondering whether he's looking at an arson trend or just a coincidence.

Weydert, a prosecutor with San Joaquin County's Economic Crimes/Insurance Fraud Unit, usually handles a residential arson case every two or three years. "Now I've got two in the pipeline," he says.

Industry analysts are divided.

"When the economics are dismal, people are doing things that perhaps they thought they would never do," says Joe Toscano, a Connecticut arson expert who, with 11 other investigators, spoke recently by phone about the issue from a meeting of the International Association of Arson Investigators.

The association's members, from seven cities around the country, say arson fraud will rise; they've seen it happen before. Arson always grows when the economy plunges, Toscano says: "Based on 35 years' experience, yes, I anticipate there will be an escalation."

But John Hall, in charge of fire analysis and research at the 112-year-old independent National Fire Protection Association, sees no link between economic stress and arson.

"We have been collecting statistics for over 25 years, and there has never been a development in the economy that has shown a clear impact on arson," Hall says.

Tales from the trenches
Some recent cases:

In Woodland Park, Colo., a homeowner was accused of burning his home just before he was evicted in a foreclosure action.

In Houston, a man was charged with faking a racial hate crime to cover arson at his home.

In Russellville, Ind., a woman was accused of trying to cash in on an insurance policy by offering her neighbor $5,000 to help torch her home and cover up the crime.

Those working in the field hear their own stories. "I have heard of builders torching incomplete homes that can't be sold," says Vince Brannigan, who teaches in the University of Maryland's department of fire-protection engineering.

Lawyer David Brisco of Cozen O'Connor says he's seen an increase in residential arson in the past six months. He investigates arson claims for insurance company clients in California, New Mexico, Arizona, Utah and Nevada. His colleagues, though, haven't noticed an upturn, and the firm, with 23 offices nationally, does not keep statistics.

Brisco says he's also working on more arsons that are motivated by financial stress. "These are not necessarily lower-middle-class people. This is all over the place. . . . We're talking some extremely wealthy individuals, based on the size of the home and the contents of the home, people who were living some lavish lifestyles who no longer can afford that."

He says that anger is another motive. "These people are so upset. They got tricked into getting these mortgages, and they never could afford them."

"If I can't have this house, no one will," one informant reported hearing a homeowner say before a suspicious house fire.

Brisco tells of a couple of evicted homeowners who are suspected of breaking into their foreclosed home before the new owners could move in, spraying the interior with angry graffiti before setting it on fire.

The insurance-industry-funded Coalition Against Insurance Fraud sees reports like these as cause for alarm: "Are insurers ready for the potential increase in arsons? Are fire investigators on alert?" Executive Director Dennis Jay asked recently in his blog.

But Jeff McCollum, a spokesman for State Farm Insurance in Bloomington, Ill., says there's no evidence. "We checked with our investigative guys; they said no," McCollum says. "They did a pretty comprehensive look at it; it's still no. It's maybe one that the coppers and the investigative guys, maybe it's just fun for them to talk about it."

Or, he says, "it could be a little bit early."

Mild-mannered arsonists
Frank Scafidi, a spokesman for the National Insurance Crime Bureau, sees no evidence of a trend, either. His nonprofit agency helps 1,000 or so member companies, property and casualty insurers, with investigations and analysis into all types of insurance fraud.

But statistics, if there are any, will be slow to surface because insurance companies pay claims first and investigate later, he says. Arson cases are difficult and time-consuming to build. Any current cases will lumber along in the investigation pipeline, invisible until charges can be made and prosecutions begun.

Many observers say there's no question that people commit arson under economic stress. "Traditionally, there will be some acts of fraud that are driven by the economic conditions, no question about it," Scafidi says. A slice of the normally law-abiding population -- in every economic stratum -- will seize on arson as a solution under the right set of pressures, he says.

For example, auto repossessions are rising, and so are cases of auto arsons. Weydert, the Stockton prosecutor, says cases have doubled in the past three years. He now has about 15 such cases. Recently he prosecuted a young man who drove his new Nissan extended-cab pickup into a canal and collected on insurance after he realized he couldn't make the payments.

Two Baylor University researchers believe they know precisely what those pressures are. Allen Seward, an associate professor of insurance and finance, and Steve Green, an associate professor of economics, studied residential arson in 30 U.S. cities between 1994 and 2002. (See a .pdf file of their study, "The economics of residential arson.")

They concluded would-be arsonists need more than just falling prices to nudge them into crime. Prices have to fall far enough to depress a home's price below the value of its mortgage, Seward says. In those cases -- present in a number of American cities now -- the small fraction of people who'd consider arson have a stronger incentive, the Baylor team found.

Arsonville
Scafidi says opportunity alone can sometimes push otherwise average people to action. Some homeowners, he says, seized the chance when Hurricane Katrina hit the Gulf Coast.

"There were arsons in the middle of a flooded city, if you can believe it," Scafidi says. "But the industry, as you can understand, was reluctant to call attention to it. We were more focused on dealing with people who were displaced."

In Detroit, "we are finding there have been a lot of greedy people, mortgaged to the hilt," says Varnas, the fire captain. Under financial pressure, they act to make certain that "I got my money." Varnas calls these payday crimes. Renters commit them, too, to collect on renters insurance.

Detroit's swaths of blighted neighborhoods with empty homes are a target for arson -- for squatters living in them, for frustrated property managers trying to force out squatters or for owners who are desperate to get at their equity when they can't sell, Varnas says.

Other cities are now also inheriting a plague of vacant homes from foreclosures. Even banks and mortgage companies are walking away from homes they've foreclosed on, forcing cities such as Buffalo and Cleveland into court to try to force them to maintain their foreclosed houses.

Making the case
These days, the Detroit Fire Department's arson tip line rings steadily with anonymous callers who want to rat out friends, neighbors and relatives. Their tales, even discounting some for dubious motives, give investigators a window into arsonists' desperate and sometimes clumsy motives and methods.

"We've got neighbors turning in other neighbors," Varnas says. One woman left a message on the tip line saying that a neighbor had offered her a chance to make some money. She declined, she said, and shortly afterward the neighbor's home caught fire.

It's not simple for investigators to make criminal cases from such anonymous tips. But emotionalism and impulsiveness sometimes make amateurs easier to catch. Sloppy arsonists dribble a detectable trail of accelerant from one room to the next with no evidence of a forced entry. Some neglect all their bills except the insurance payments. Other red flags: removing furniture and belongings in the days or weeks before a fire, or a history of insurance claims.

Stressed homeowners who intentionally leave a pot with oil on the stove or deliberately provoke an electrical fire may assume that their intent will be impossible to prove. But arson investigators are becoming increasingly focused and sophisticated. The Insurance Services Organization manages a database used to compile and cross-reference information about all insurance claims. Investigators use it to spot repeat claimants and those who collect multiple payments by insuring the same property with several different companies.

"A lot of people don't realize the extent to which insurance companies investigate these," says Brisco. Arsonists who think, "'Oh, yeah, insurance companies will just pay out this money -- they won't conduct any investigation,' are in for a surprise."

http://articles.moneycentral.msn.com/In ... Arson.aspx

Wow . . I knew things were really bad in Detroit but I didn't know they were that bad. It must be horrible being trapped in a state with one of the highest unemployment rates in the nation and compounded with the fact that you can't pay your mortgage and will soon be homeless.

Something tells me this is going to be a way out in the minds of a lot of frustrated, angry jobless Americans.