In early October, Paula Wagner bought her dream house, a $140,000 home in Catonsville that she now may lose because of alleged thefts by Joseph E. Goldberg Sr.
A few days after the purchase, the lender for the seller of the house informed Ms. Wagner that the seller's loan had not been paid off by Mr. Goldberg's firm, Land Title Research, where the property settlement took place.
Ms. Wagner faces a foreclosure on the house in February because Mr. Goldberg allegedly took the funds she paid for the )) house and she had failed to buy title insurance that would have covered such a theft.
"I haven't stopped crying since this happened. What's going to happen to my money and the home?" Ms. Wagner said at a court hearing Friday in the Goldberg case.
She stands to lose $80,000 that she put up to buy the house, plus the $60,000 she borrowed to close the deal.
State insurance officials don't know how many others in Maryland may face similar financial problems as a result of the Goldberg case.
An insurance company is suing Mr. Goldberg, and the state has launched a criminal investigation.
But as Ms. Wagner's plight illustrates, title insurance -- which would have given her some financial protection -- isn't clearly understood by many homebuyers.
If you've ever received a home loan, chances are you've been offered title insurance by a title agent. These agents prepare the property settlement papers, figure out who's owed how much and transfer money between you and the seller.
They also sell title insurance, a little-known form of insurance that's often required by lenders in property transactions. It protects buyers from having to pay if property titles later are found to be encumbered by liens.
Title insurance typically is backed up by huge national insurance firms. These underwriters, in turn, hire local agents and brokers to hawk their policies.
In Maryland, it's very simple to become a licensed title insurance agent, even though conducting settlements can be enormously complex -- particularly for large commercial transactions.
Competition is fierce. With thousands of property transactions each week in the state, there's good commission money and settlement fees to be made by agents.
One of their key services is distributing funds put up by lenders and buyers to pay prior lenders and those who provide services for transactions, such as termite inspectors, property appraisers and title-search firms.
Such funds usually are first placed into an escrow account, where they're typically held for three to five days. With hundreds of settlements a month, these accounts can run into the millions of dollars.
When real estate sales are on the rise, money taken out of escrow accounts -- by anyone with check-writing authority -- might not be noticed as long as new funds kept coming in.
But if business suddenly cools and the flow of cash into escrow accounts drops, that money is missing can quickly become evident.