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Action News 5 Investigates: Burning Down The House

In the midst of the Mid-South’s dismal housing market, desperate homeowners are starting to destroy their properties – even to the point of setting them on fire – after banks have foreclosed on them for defaulting on their loans.

Experts say the motivation is revenge – or the chance to collect an insurance claim.  But the lien-holder, in most cases the mortgage company, is who gets the check, not the homeowner.

“The homeowner gets nothing in this,” says Kathy Thurmond-Edwards, a State Farm insurance agent based in East Memphis.  “Acts like this, all they do is increase our rates on down the line.”

An open records request by the Action News 5 Investigators reveals there were 148 residential arsons within the city limits between January 2005 and December 2007.  20 of those involved homes listed as foreclosures or foreclosure sales.  Nine of those are raising concerns with arson investigators:

• 4070 Denver Street.  Listed for foreclosure 7/16/2007, never sold.  Set on fire 11/3/2007, less than four months later.
• 4483 Whiteside.  Listed three times for foreclosure, the latest notice on 5/11/2007.  Set on fire 10/22/2007, less than five months later.
• 3462 Knight Rd.  Set on fire 10/7/2007.  Eight days later, it was placed on foreclosure notice.
• 787 Pearce St.  Listed for foreclosure twice before it was burned, the latest 6/11/2007, three months before the arson (9/19/2007).  Listed for foreclosure once again on 4/1/08.
• 4880 Winchester.  Listed SEVEN times for foreclosure, the last time 4/29/2005.  Set on fire 9/17/2007, more than two years later.
• 2739 Frisco Ave.  Listed three times for foreclosure, the latest 8/2/2007.  Set on fire 8/21/2007, 19 days later.  Sold as foreclosure 11/19/2007.
• 1227 Phillips.  Listed NINE times for foreclosure between 2001 and 2006, the last time 6/22/2006.  Set on fire 7/6/2007.  Sold as foreclosure 12/20/2007.
• 5512 Cottonwood.  Listed as foreclosure 3/26/2003.  Scheduled to sell 4/25/2003, but never sold.  Set on fire 3/19/2007.
• 920 N. Watkins Rd.  Listed SIX times as foreclosure between 1996 and 2006.  Sold as a foreclosure 10/24/2005, but put on notice again in 2006.  Set on fire 3/10/2007, then sold again as a foreclosure 2/19/2008.

A few of the properties were abandoned after their foreclosures.  One involved a child setting the house on fire.  1227 Phillips, whose owner has five properties in foreclosure, was a rental property set on fire by the tenants during a domestic dispute.

Memphis Assistant Fire Marshal Joe Payne confirms each of the properties’ foreclosure conditions were high on the list of potential motives for the arsons.

“Some of them are very, very questionable, and the investigation is definitely ongoing,” says Payne.  “I'm very concerned about that.”

Corky Neale, research and innovative specialist for the RISE Foundation (www.risememphis.org), says Memphis is 14th in the country for the number of foreclosures.  He says he’s not surprised to see evidence of property destruction, considering the city’s low average in credit scores and high percentage of bankruptcies.

“Memphis, because we have, on average, low credit scores, we got sold mostly sub-prime paper,” says Neale, referring to sub-prime loans that push no money down and zero-percent financing.  “And even those people who have upper incomes, didn't matter.  You could have had a good credit score, but got sold sub-prime paper.”

The Memphis Daily News, Shelby County’s leading tracker of foreclosure trends, predicts the destruction or arson of foreclosures is most likely to occur in Frayser’s 38127 zip code, the county’s leader in foreclosures and bankruptcies.  Executive Editor David Yawn says Cordova’s 38016 is another hot spot.  It has seen a 128 percent increase in foreclosure sales within two years.

“You have to really look at upside potential, down-side risk and what drives people to do things,” Yawn says, “and economically, I think it will continue to have some fall-out.”

The Memphis Housing Counseling Network (http://memphis.earnbenefits.org/mhcn/) offers FREE assistance from licensed counselors to borrowers facing foreclosure.  The counselors can help them extend the terms of their current loans, restructure their loans, lower their interest rates or even help them sell their homes before a foreclosure destroys their credit.

"We'll negotiate a 'short sale' between the realtor and that borrower, and help them get out of their home," says Roshun Austin of GMAC RESCAP/Homecomings Financial, LLC, a member of the Memphis Housing Counseling Network.

Borrowers can take advantage of Austin's services by calling 901-276-0079.  The Memphis Housing Counseling Network's number is 901-725-8361.  Borrowers can also call the Credit Counseling Resource Center at 1-888-995-HOPE.