That the US is undergoing a serious crisis on the home loan front is well-known. But what is not is that the mess left behind by bankrupt homeowners is itself becoming major headache to the authorities.
In other cases, homeowners also stage-manage arson to claim insurance reimbursements.
Faced with foreclosure on her Russellville, Indiana home, Christina Snyder allegedly concocted the kind of plan that now has insurance executives on edge, the Fortune magazine reported recently.
According to the county prosecutor, the 31-year-old Snyder allegedly offered to pay a neighbor $5,000 to help her burn down her house and make it look like a botched rape attempt - all in order to claim $80,000 in insurance money. Snyder wanted the neighbor to bind her hands in duct tape, write "whore" on her shirt, and then help her escape once the blaze was set, the prosecutor says. The neighbor demurred, instead reporting Snyder to police.
With the national foreclosure rate zooming and the real estate market in a two-year funk, the insurance industry fears more homeowners will see arson as a way out of their financial woes. A recent report by the industry-funded Coalition Against Insurance Fraud notes that with "untold thousands of homeowners struggling with ballooning subprime mortgage payments, fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments."
Mike Siemienas, a spokesman for a major insurance firm said his company was already noticing an increase nationally in arsons among homes in foreclosure. In California, the state¹s insurance division reports that the number of questionable residential fires in 2007 increased 76 percent over 2006.
Banks initiate foreclosure action, that is file a lawsuit, to take hold of the properties of defaulters. Foreclosures are assuming huge proportions in that country.
Now those who are forced out, unable to repay their debt, sometimes fake arson as mentioned earlier.
In other cases, homeowners either trash, or simply leave their trash lying around their houses, often taking off without even claiming their furniture.
In fact they have a new word for what happens when people just mail their house keys to the mortgage company: trashout. Firms specialize in clearing furniture, trash, and the rest of the stuff out of the house when people abandon it. And it looks like a growth industry.
This is already a dirty problem in the housing business, with owners, lenders and banks having to figure out a way to stick each other with the check when tenants destroy their property on their way out the door. Woe is the person left behind to clean up the chaos.
"We just estimated a trashout yesterday where we're going to have to drain the pool," one Fontana, CA resident posted on AgentsOnline.Net, a resource and idea site for realtors, "and the stench from it when you enter the backyard is overwhelming. Then, of course there are mosquitoes all over the top and it's been sitting so long without chemicals that it's green on top and murky black on the bottom. We've already had to refuse one pool because of its really creepy condition and I'm not so sure about this one either. [I] just hope we don't find the previous homeowner at the bottom when we drain it."
"Vacant homes attract vandals and depress property values," explained Douglas Robinson, spokesman for NeighborWorks America, a nonprofit organization.
The open secret about the current housing crisis is that it is almost wholly built upon debt, which is to say the opposite of money. Everyone owes everyone: American banks borrow money from overseas, structure bizarre loans at home for Americans, which are then sliced and diced into securities and sold back to the international debt markets. The whole thing is a feedback loop made of bills needing to be paid, points out Scott Thill, writing in AlterNet.
"We strongly encourage homeowners facing a financial crisis to stay in close touch with the lender holding the mortgage on their home," advised Larry Bush, Public Affairs Officer for the California network of the U.S. Department of Housing and Urban Development..
"Because of the number of foreclosures, many lenders would prefer not to add to the inventory of foreclosed homes but instead work out an agreement with the homeowner. Lenders likely have higher costs for a vacant home than a homeowner has for living in the home. They have to make certain the property is kept in good condition, in most jurisdictions this means keeping the electricity and water hookups active, security monitoring to ensure there are no squatters or break-ins, and new appraisal and inspection……….."
"Most of the homeowners now facing problems bought their homes when the market was at its recent height in 2005-2006, and paid prices that have not held up in the current market," added Bush. "That leaves the homeowner owing more than the current value of the home."
I know some will find walking away from homes morally unsettling somehow, but I don't see what's wrong with people behaving as businesses would, argues a blogger.
So who picks up the tab as the environment gets more and more muddied? No one seems to have an answer.