From Foreclosure to the Cleaners


M

MrPepper11

Washington Post
December 25, 2004
From Foreclosure to the Cleaners
Indebted Owners Sign Over House Titles to 'Rescue' Services
By Sandra Fleishman
Washington Post Staff Writer

When Idriis Bilaal, 77, got a foreclosure notice about a year ago, all
he could think about was how he could save the home where he had been
born, a run-down red-brick rowhouse in Northeast Washington.

After a series of sleepless nights and failed attempts to find money,
Bilaal accepted an offer from one of a host of "foreclosure rescue
specialists" who had called or left fliers and business cards as soon
as the notice of foreclosure was published.

He signed some papers provided by an ex-con and retired minister named
Calvin N. Baltimore -- without wearing his reading glasses, he says.

Soon after, to his horror, Bilaal says, he realized this wasn't a loan
-- he had in fact signed away the title to his 100-year-old house to
Washington businessman Vincent L. Abell, who was convicted years ago
for his role in a huge real estate fraud in the 1980s.

The house recently was appraised for $255,000, but Bilaal received less
than $20,000, according to his lawyers -- the $7,000 that he had fallen
behind on his mortgage, plus $10,000 cash. 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.

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.

"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 Depression, and the few of us whose
families were able to get property want to keep it," he 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 "subprime" mortgage loans
have the highest delinquency and foreclosure rates, according to
national statistics. That makes them the biggest targets. And although
not all subprime 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 subprime loans," said AARP lawyer Jean
Constantine-Davis. "And 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," he 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?"

Baltimore called the allegations "totally incorrect." He 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.

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 or more." 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."

------------------------------

Forearmed Before Foreclosure

AARP lawyer James T. Sugarman says "there are dozens of ways to save
your house from foreclosure" but that those in desperate times too
frequently jump at bad deals.

His rule of thumb is, "Never do business with anyone who comes to your
door or calls you out of the blue or sends you a flier. It's so bad out
there that you can't afford to trust a stranger."

If you're facing foreclosure:

· Look into renegotiating the loan with the lender or working out a
repayment plan.

· If you can afford it, get a lawyer from the local bar association
referral program or a lawyer recommended by a trusted friend to help
fight the foreclosure. If you have a low income, contact the local
legal services network.

· Contact a government-approved housing counselor. Counselors are
listed by state at www.hud.gov, the Web site for the Department of
Housing and Urban Development.

· File a Chapter 13 bankruptcy to reorganize your debts. That will
stop a foreclosure. But you must keep up the mortgage payments during
reorganization. Be sure you get a reputable bankruptcy lawyer. (Some
con artists offer to file bankruptcy petitions for a homeowner, but
never file the appropriate follow-up paperwork.)

· If you suspect the lender won't agree to cooperate or has included
abusive terms, contact the local licensing regulator, consumer
protection agency or federal banking regulators.

If you think you have been scammed:

· Any D.C. resident who is over 60, living on a low income and
suspects a rescue scam can contact AARP's Legal Counsel for the Elderly
at 202-434-2120.

· Contact HUD's National Servicing Center at 888-297-8685. The center
refers callers alleging scams to local authorities and HUD-approved
agencies, as well as the Better Business Bureau.

· Seek a temporary restraining order in your state (or D.C.) court.

Before the foreclosure notice comes:

· Elderly homeowners on fixed incomes can apply for reverse
mortgages, the kind for which you draw money against the equity in your
house for as long as you live rather than having to pay a mortgage.
Such loans are fairly complicated, but certified housing counselors are
very familiar with them. AARP's Web site offers information at
www.aarp.org/revmort, and the Federal Trade Commission has advice at
www.ftc.gov/bcp/conline/pubs/homes/rms.htm.

And finally:

· If you go through all the steps and you hear repeatedly that the
best thing to do is to sell the house to a legitimate buyer, don't
resist.
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