Insurance fraud investigators are girding for an expected rash of arsons by cash-strapped homeowners trying to avoid foreclosures and ballooning monthly payments as the subprime mortgage crisis deepens.
“Home arsons for insurance money by mortgage-burdened owners are hardly new. The question is whether a new and virulent spike looms,” says the Coalition Against Insurance Fraud.
Falling home values and tighter lending are making it difficult for many people to finance their way out of trouble. More than $50 billion in adjustable-rate mortgages were reset last month, thus intensifying the financial crunch on homeowners, says the coalition’s Executive Director Dennis Jay.
“The subprime mortgage crisis is crushing untold thousands of homeowners under heavy mortgage payments they can’t afford—especially as many monthly payments adjust upward sharply after introductory teaser periods of low-interest rates,” he writes in an artcile in its publication, Fraud Focus.
Only a few suspected home torchings have surfaced so far. Samuel White allegedly burned down his Houston home for insurance money to dodge a scheduled foreclosure. An African-American, he allegedly spray-painted racial slurs around the interior to make the suspected crime appear to be a hate crime.
Suspected mortgage-related home arsons already have jumped 50 percent above the 2006 rate in California, though the numbers are still relatively small, the insurance department says.
The industry’s Rocky Mountain Insurance Association also is watching its region closely. In fact, one Woodland Park owner allegedly torched his home just days before he was scheduled to evicted in a foreclosure.
“I don’t believe that it’s had time to ripple through the market yet to the point that many people have reached the point of desperation,” EFI Global fire investigator Alex Ahart says. “But I absolutely think it’s coming.”
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