Why Justice is Denied

The system is failing citizens in staggering numbers and it's created a Society of Cast Aways.

A law professor tells Congress why victims are falling through the cracks.

But Abell's company did not agree to pay off or assume Bilaal's mortgage, so Bilaal remains responsible for those $714-a-month payments. On top of that, he began making rent payments of $500 a month to Abell's company.

Idriis Bilaal points to pictures of his family in the 100-year-old house - in Northeast Washington - where he was born. He has filed a lawsuit claiming he was duped into selling his home. (Len Spoden For The Washington Post)

Consumer advocates say they have seen a mushrooming number of similar situations around the country, in which house-rich but cash-poor homeowners desperate to stave off foreclosure end up losing ownership to those who promise to save them.

"You can sort of tell [what's happening] by all the signs posted on street corners and telephone poles," said Doyle Niemann, assistant state's attorney in Prince George's County, where three cases of possible rescue scams are under investigation. Such signs usually trumpet "stop foreclosure" or "save your house."

The fraud, he said, is "they're not making loans, they're expropriating houses at a discounted price and pocketing the difference."

Bilaal still is not sleeping well, but he remains in the house, despite a recent eviction lawsuit filed by Abell's company, Modern Management Inc. of Northwest Washington. In September, Bilaal filed suit in D.C. Superior Court against Abell, Baltimore and five others for allegedly having "tricked" him and two other D.C. homeowners out of their deeds.

The three plaintiffs are represented by lawyers from the Washington office of AARP's Legal Counsel for the Elderly, the AARP Foundation Litigation and Hogan & Hartson.

Idriss Bilaal

"I would never have considered selling my house," Bilaal said recently. The veteran of World War II, Korea and Vietnam, who retired with post-traumatic stress syndrome in 1967, said he has always wanted to leave his house to his children.

"I wouldn't want to live anywhere else. . . . I came along during the Great Depression, and the few of us whose families were able to get property want to keep it," Bilaal said.

The defendants deny the allegations, saying that they saved the houses from foreclosure and that the homeowners understood the terms of the deals, under which they would be renting back the houses they once owned.

The deals give people the chance to repurchase their house after a year. In Bilaal's case, the price would be $110,000, according to the lawsuit.

"All of my clients had one year to raise over $100,000 to buy their home back," said AARP lawyer James T. Sugarman. "This would be on top of their present mortgage loan amount. Even if my clients did understand the terms of the so-called buy-back option, it would be impossible for them to do because they could never qualify for a $100,000-plus loan on top of their current loan."

Reports of problems with foreclosure rescues have increased in the past 18 months, according to consumer advocates and regulators. The number of homeowners in delinquency or facing foreclosure has steadily marched on, while at the same time home values have skyrocketed. About 435,000 loans nationally were in the foreclosure process in the third quarter of 2004, and 1.7 million were delinquent.

"It's happening more and more frequently because there is the potential for significant gains in this housing market," Niemann said. "The people who are being preyed upon are the most vulnerable -- the elderly, for instance."

Borrowers with poor credit and higher-cost "sub prime" mortgage loans have the highest delinquency and foreclosure rates, according to national statistics. That makes them the biggest targets. And although not all sub prime loans are abusive, borrowers with abusive high-cost loans have even fewer resources to fight scams, consumer lawyers say.

"The people who are in these situations more often than not have had a series of horrible sub prime loans," said AARP lawyer Jean Constantine-Davis. "Now they've been conned into a transaction that they think is a loan but isn't."

Catherine Meads, 64, a co-plaintiff in Bilaal's suit, transferred title to Abell in 2002 on a house appraised later at $270,000. She said: "I didn't think I was selling my house for $9,000. When my sons said I had signed away the house, I couldn't explain to them what I had done. It took me about four months to understand, and I still don't understand what I have done."

What the homeowners don't realize or don't want to accept, advocates say, is that their problems could be solved if they simply sold their houses -- in this market, the houses could fetch much more than is owed. Or they could work with nonprofit, government-approved housing counselors to develop plans to work out their debt.

While foreclosure notices have been public record for years and could be found by investors who checked newspapers ads or government offices, records are now computerized and firms are set up to immediately sell the lists, consumer advocates say.

"Those facing foreclosure quickly receive five-to-10 fliers a day offering help," said Pamela Sah of South Brooklyn Legal Services in New York. People also show up at their door and call.

Maryland regulators and others say the upswing in problems tracks the flooding of neighborhoods with windshield fliers and signs on telephone poles advertising rescue services.

The signs are showing up "in poorer neighborhoods all over the place," said Stephen Prozeralik, director of enforcement for Maryland's Department of Labor, Licensing and Regulation (DLLR).

Real estate fever is adding fuel to the fire, said Benjamin Diehl, a deputy attorney general in California: "What feeds the scams is all of the information on TV and in newspapers about how to get rich in real estate."

Minnesota passed a tough law to deter scammers earlier this year after a series of complaints, including allegations that one company had defrauded about 250 homeowners.

State Attorney General Mike Hatch (D) lobbied for the legislation because he says the problem is "huge . . . and way underreported. We're talking millions and millions of dollars of damage."

Regulators in New Jersey, California, Pennsylvania, Ohio and Utah are all pursuing civil complaints against companies they claim have defrauded consumers.

Advocates and regulators say that the nation's criminal prosecutors are not yet responding because these cases are complicated and because defrauded homeowners often don't realize they've lost title until it's too late -- when they get an eviction notice from the new owners.

Landlord-tenant courts, however, typically don't allow a challenge to an eviction on the grounds of disputed ownership unless the tenant pays the landlord monthly and posts a bond, money that the onetime homeowner often doesn't have.

Maryland regulatory officials say the situation demands more attention.

"I hate to use the word 'epidemic'; we're relatively new," said Prozeralik, who was hired as director of enforcement for Maryland's DLLR this spring. But the office has investigated five cases of alleged rescue fraud since summer and issued a consumer alert in the fall.

"To me, five cases is five cases too many. It indicates a serious problem," Prozeralik said.

The suit that AARP's lawyers filed on behalf of Bilaal, Meads and Willie King, a third D.C. homeowner, claims that Abell, Baltimore and five others conspired to "deceive" the homeowners, who thought they were getting loans to save their homes, into signing away the titles, and that, in return, the homeowners "got a fraction of the value of their homes."

The defendants, in interviews or through their lawyers, deny the allegations, contending that they did save the houses because they stopped the foreclosure auctions and the homeowners got to stay as renters.

"I didn't make any false representations to any of these people," Abell said. "These people were in foreclosure and I bought the houses from them, and that's why they're still in their own homes today. Otherwise their houses would have been sold at foreclosure . These people didn't have the money to stop the foreclosure."

"The homeowners understood what they were signing," Abell said. "I know that it was explained to them. What I've seen in the files are sales contracts and lease agreements that people have entered into, and then they've paid rent. That's what I've seen. Why would they pay me rent for months if they didn't understand?"

"The allegations are totally incorrect," Baltimore said, "Of course they understood what they were signing. . . . Mr. Bilaal, the very first meeting, he had his attorney there -- at the Burger King, at Third and Florida Avenue NW. We met for almost an hour. His attorney asked me a whole bunch of questions. Then Mr. Bilaal called me the next day and agreed. His attorney drilled me like crazy. How can somebody say that's fraud?"

AARP's Sugarman said that Bilaal didn't have a lawyer with him.

"He says he brought along a friend, not a lawyer," Sugarman said.

Vincent Abell and Calvin Baltimore
Convicted Criminals for Real Estate Fraud

Both Abell and Baltimore have criminal records for mortgage fraud. Abell, then a real estate agent in Silver Spring, pleaded guilty in the late 1980s to making a false statement and "causing an act to be done" following a criminal investigation into an operation described in 1990 by The Post as "the largest real estate fraud of its kind in Washington's history."

It involved a decade of Federal Housing Administration loan-insurance fraud. Abell was sentenced to two years in prison, with all but six months suspended and two years' probation, was ordered to pay $20,000 in restitution and was fined $5,000.

Baltimore pleaded guilty in U.S. District Court in the District in 1990 to one count of conspiracy for serving as a "bird dog," or loan broker, who solicited individuals to borrow money from two lenders at interest rates from 38 percent to 50 percent.

Baltimore was sentenced to five years, suspended with five years' probation, and was ordered to make restitution of $8,000. After a subsequent arrest and conviction in 1994 for transporting stolen goods, he was sentenced to 25 months in federal prison and later ordered to serve the earlier sentence of five years for violating probation. He was released in 2001.

Baltimore said in an interview that he would not discuss his past.

Abell said that he has a track record of "buying and renovating houses for 20 years." He moves to evict, he said, only "if people haven't paid their rent."

He repeated that he was helping people who had few choices on the eve of foreclosure. "Every one of these people would not be still in their houses today" if they had not taken up his offer, he said. "They would be evicted and uprooted. I didn't put these people in their financial position."

Bilaal says it was the shadow of eviction that scared him into signing the papers.

"I was under duress when Baltimore walked through my gate and said he could save my house," he said. "Every time I saw people's stuff on the street, I would say that that was me next."

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Ex Con Takes Veteran's Home

 

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Idriis Bilaal, et al. v. Vincent L. Abell, et al

 

1. Docket Text:, (Notice) of Vincent L. Abell, of Substitution of Party Exhibits 1 and 2... to the court from Abell DTD 09/12/06 (Court's Notation) ...

 

 

 

 

 

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