After a recent fire devoured most of a two-story home in a Pennsylvania urban area, investigators didn't take long to find what they think might be the cause- a subprime mortgage.

David Rioux, the vice president and manager of corporate security and investigative services at Erie Insurance said the case was anecdotal evidence that some financially strapped homeowners with subprime mortgages might be spurred into committing arson for profit.

But, while he and other investigators say there are no conclusive numbers, they take the attitude that being proactive is a wise course to prevent a trend.

Because the questionable fire case Mr. Rioux mentioned is under continuing investigation, he could not provide any specific identifying details. The two story home in a city area, he said, was refinanced about a year ago by an owner with money problems who eventually qualified for a balloon mortgage.

The homeowner was put in the subprime market with an adjustable rate of 7.5 percent and was notified shortly before the fire that it would be going up to 14.5 percent. “In this case we're looking at arson motive and opportunity,” explained Mr. Rioux pointing to the staggering increase in monthly payments.

Neighbors called in the alarm on the daytime blaze in a two story home, which was mostly destroyed. “We do believe we have motive and now we're looking at opportunity. The insured was within close proximity to the fire,” said Mr. Rioux.

A few cases, such as this, he said, may possibly not be a trend indicator. Despite economic strains and people caught up in subprime mortgage situations it is hard to say if arson for profit is growing, “but as 2008 progresses we will see if this is a trend or not.”

“Keep in mind the flip side” he advised, “the subprime extends to auto.” And he wondered, “Will we have more cars going up in flames and disappearing?” Adding that his unit is looking at auto cases and the possibility of an increase in so-called “owner giveup” cases. “Usually when a car is burned that's a red flag,” said Mr. Rioux.

One expert in the field, who has difficulty finding a correlation between hard times and arson, is John Hall with the Fire Analysis and Research Division of the National Fire Protection Association, who holds a doctorate in operations research and the mathematics of decision making.

Dr. Hall in a recent paper looking at whether there is a link between fires and economic conditions found that for nearly three decades intentional fire rates have sometimes been level, but there have been no periods of a sustained upward trend.

There have, he wrote also been “no notable increases in years with recessions or other economic shocks.” He also notes that half of arsons arrests involve juvenile and other fire setters, more than money, have been shown to have revenge or spite as a motive.

With arson for profit in third place as impetus for fire-setting, Dr. Hall said it becomes a subjective issue as to how big a problem that kind of fire is.

In difficult financial times, Dr. Hall wrote, it is not unusual for local fire officials and insurance adjusters in some communities to report apparent jumps in some types of arson.

His study looked at the recession year of 1982 and found there was no period around that year when national arson numbers appeared to go up substantially.

In the recession and oil price shock year of 1990 also showed no spikes and in 2000 and 2001 vehicle intentional fires declined and sizes of increases and decreases were not notable against normal year-to-year variation.

However, Dr. Hall noted that none of his analysis precluded the possibility “that there have been increases in arson, driven by economics within particular communities, particular states or particular industries.”

Joseph Toscano, a certified fire investigator and spokesperson for the International Association of Arson Investigators would say amen to that last statement.

Considering the current economic situation he drew an analogy to meteorology, “If you were a weather person and saw indicators of fronts converging, it would be a prudent assumption that these things could add up to a nasty situation. It's sort of a common sense approach,” he said.

Mr. Toscano mentions the extensive collapse of the home real estate market that has caught thousands of leveraged buyers up short, revelations about extensive mortgage fraud, and commented that with those factors converging, “It's looking at the perfect storm.”

In his view, it is important not to wait for any statistics to bear out a trend.

Common sense, he says, tells you that there are some people who will resort to fire. “We're just too ripe too many factors coming into play which are just too negative,” said Mr. Toscano.

He said he has heard estimates that the nation could see 2 million foreclosures and cities that are strapped may cut back on fire investigation resources, as businesses cut back on important maintenance that could avert accidental fires. “There's nothing positive,” bemoans the investigators.

Mr. Toscano regards Dr. Hall as a foremost expert in his field, but he said he is “not sure we ever had the unique driving factors we have now. I'm basing my comments on the hundreds of thousands of years experience in our membership.”

He noted also that the data on fires in some cases can be flawed because when initial fire reports are filed the cause may not be indicated as arson, which may only be discovered “weeks after the report is filed.”

At the time he was interviewed Mr. Toscano was in Las Vegas attending the Insurance Committee for Arson Control, which involves more than a dozen carriers. He said prosecutors he spoke with said consistently “that they are seeing a spike in arson.”

Veteran that he is, Mr. Toscano remembers the 1970's when arson in cities was rampant and it was an easy crime to get away with. “It was brash and bold,” he recalled, landlords would go into depressed areas “they would buy a building and 30 days later it was gone.”

Until the arson for profit became a full fledged scourge insurers were doing little and “there was an air of tolerance in the industry. We were not aggressively dealing with it until it became epidemic.

The insurance industry can't afford to wait and has to act now, he warned.

Special Reports /

Subprime Is It Causing Arson

Related Stories

Recommended For You