Burn ban: Will arson follow foreclosures?

by Patrice Sarath, July 9th, 2008, 7:00 am

Banks and mortgage holders are bracing themselves for the next wave of foreclosures as ARMs reset. What some other industry veterans are also bracing for is a wave of fires.

Bloomberg quotes James Quiggle, a spokesman for the Coalition Against Insurance Fraud, who states, “Home arsons follow foreclosure trends, with a lag. We’re facing a potential spike in arson like we’ve never seen before.”

According to housingwire.com, many homeowners whose homes have been foreclosed on damage the property before they leave. Punching holes in the drywall is often the least of it. Arson could be the worst, and if Quiggle is right, we’ll see a lot more of it.

So what does this mean? Neighborhoods are already suffering as more and more houses are left vacant. Vagrants move in, causing damage; untended lawns and properties lead to deterioration, which in turn affects the entire block.

An Atlantic Monthly article discusses what happens when suburban neighborhoods empty out, and it’s not pretty. Across the country, property and other crime rises in unlikely suburbs, leading to an unexpected irony; homeowners who fled cities because of crime and poor schools are now leaving the same conditions in their wake.

So what happens now? Will suburban communities recover? As neighborhoods deteriorate and gas prices continue to rise, will people make the return journey and head back to the cities? What will happen to the schools, the tax base, and infrastructure (roads, sewer, fire, and police)?

Here’s one solution. Mortgage holders don’t want to foreclose on homes. When there are just a few foreclosures it’s a costly headache, so the current deluge is unmanageable, whether banks admit it or not. So what if, instead of removing the homeowner, the mortgage can be rewritten as a rental contract? Obviously the bank will take less money in rent than a house payment, but it will keep the house occupied and kept up, the property stabilized, and the neighborhood a little bit safer.

Better to keep a fire from starting than to have to put it out.