Florida, one of the hottest real estate markets during the insanity of the housing bubble, is suffering from a barrage of wildfires that look suspiciously like the work of arsonists. When the credit crisis struck and housing values began to fade, I wondered about the potential for unethical and desperate homeowners willing to experiment with creative ways to escape their financial obligations. With many homeowners over-leveraged and paying for homes worth less than their mortgages, otherwise known as “underwater” mortgages, I thought that some homeowners would happily walk out of their homes and mortgages. I also thought that we might see some homeowners attempting to collect on their home/fire insurance policies by lighting things up.

The arsonists are covering their tracks by starting more than one fire. It is much harder to pinpoint who would be motivated to escape from their rapidly deflating home equity values by taking a torch to things. Whatever happened to rule of law and respect for property?

On a related note, Jordy Gunderson cites an interesting piece from presidential candidate Ron Paul regarding the mistakes big government made in managing the economy.

I referenced last week Mark Zandi of Economomy.com (MCO)regarding the increased likelihood of homeowners walking out of their mortgages and homes as the amount they owe becomes greater than the value of their properties. Bloomberg just reported that foreclosures are on the rise as owners “give up” on “underwater” homes.

U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said today.

New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the organization said in a report today.

“We’re seeing people give up even before they get to the reset because they couldn’t afford the home in the first place,” said Jay Brinkmann, vice president of research and economics for the Washington-based trade group.

A couple days ago, Ben Bernanke essentially said that banks should “take the hit” and help distressed borrowers by writing down principle. Two days later, the Federal Reserve just released the Balance Sheet of Households report showing that homeowners’ equity as a percentage of household real estate has shrunk to a record low. As the panic grows, housing prices will continue to plunge and we will see more owners with negative equity situations.

We likely have not seen the end of the bad news. It will be interesting to see what creative methods borrowers will employ to escape their financial predicaments. What kind of shenanigans will we see?