No State Insurance, Bonding Requirement For Closing Agents Leaves Unwitting Couple Victimized By Refinancing Ripoff Holding The Bag, Facing F'closure

In Parker, Colorado, The Denver Post reports:

• Tim and Kim Canning of Parker did what tens of thousands of other Coloradans do each year: They refinanced their home, showed up at the closing, signed the papers, and that was that. So they thought.

• But the $277,000 that was to be sent from the bank that refinanced the Cannings' home to pay off the old mortgage was stolen along its electronic journey, the target of organized cybercriminals out of Eastern Europe or perhaps Russia, according to people familiar with the case who refused to be identified because of the ongoing investigation.

• What seemed an innocuous transaction got twisted into a two-year nightmare that's all but ruined the couple's credit, unnerved their patience and has them staring at the possible foreclosure of their dream home without ever having missed a single mortgage payment.

• Worse still, what's happening to the Cannings could happen to anyone — and it has. The Colorado Division of Insurance, which regulates the title industry, said in a report to the legislature this month that "recently there has been an uptick in reported thefts," though it did not quantify the trend.

• And the title company that handled the closing — Classic Title Agency in Aurora — isn't insured for the theft because state law doesn't require it, even though title companies handle billions of dollars in real estate transactions yearly.

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• Unless a homeowner hires a special licensed company whose job is to hold the proceeds of a sale — known as a "qualified intermediary" or a "1031 exchange" firm — and who must be bonded and insured, the proceeds are not protected.

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• "You can't imagine how upset I was when I heard that," Kim Canning said. "We hand them all this money and there's no guarantee that I'll still have my house in the end." Whether it's a loophole or a massive gap in regulations, title companies at a minimum should be required to have a bond and crime insurance, said industry advocate Garry Wolff, owner of TI Services.

• At the moment, companies and their agents merely need to be licensed — pay a fee and pass a test — and prove a $10,000 net worth. "That's it," said Wolff, who has pressed for the insurance coverage for years without success. "With so much money on the table, consumers need to know they're protected."

For more, see Homeowners stuck if refinance money is stolen.

See also KMGH-TV Channel 7: Did Russian Mafia Steal Family's Refinancing Money? (Title Company Claimed Russian Mob Stole Money During Wire Transfer).