Sunday, April 08, 2001
Title firms fold; home buyers stiffed
Underwriters suing for misuse of funds
The Associated Press
COLUMBUS Two central Ohio title companies have collapsed in recent weeks, costing dozens of homeowners and lenders in Ohio and neighboring states millions of dollars.
Midwest Title of Powell and First Ohio Title of Westerville closed last month after being sued by their underwriters.
They are accused of taking money from home buyers and their lenders at real-estate closings and not properly distributing it to property sellers, mortgage companies, real-estate brokers and other parties.
Instead, according to lawsuits and attorneys, the title companies' owners used the money for company operations and personal expenses, including a $24,000 piano.
Left holding the bag are home-sellers and buyers.
People will file bankruptcy over this, said A.C. Strip, a Columbus lawyer involved in the case. Judges have placed both companies in the hands of receivers. First Ohio Title has filed for bankruptcy.
The owners of the companies Gloria Long and Michael Wozniak at Midwest Title and Dori Koontz-Ryan and Joseph Baldwin at First Ohio Title deny the lawsuits' claims.
To the best of my knowledge, the individual defendants have never taken money out of the trust accounts for their personal use, said Bryan Jeffries, a Columbus attorney who represents Ms. Koontz-Ryan and Mr. Baldwin.
The extent of the damage is unclear, but initial estimates indicate more than 50 property transactions were affected and at least $3 million was not distributed.
Critics of the state's laws concerning title companies said the cases point out the lack of oversight for such companies.
This cries out for new legislation, said Strip, who represents the receiver placed in charge of Midwest Title. They're not bonded and there's very little legislation covering title companies. Legislation should be required that the funds be isolated.
Title companies are the middlemen in real-estate transactions. They accept money from the property buyer and the buyer's lender and distribute it to the seller's mortgage company and other parties to the transaction.
They keep a small portion, typically $1,500 to $2,000, and give the balance to the seller.
Between the time a title company receives the money and distributes it usually 48 hours the money is kept in escrow. Escrow money usually is kept separate from the title company's operating account.
In the case of Midwest Title and First Ohio Title, the escrow and operating accounts were not kept fully separate, according to the lawsuits.
Buyers whose deeds were not recorded could lose their down payments and still owe their new mortgage. Sellers whose money wasn't distributed might lose any profits from the sale of homes.
Dennis Schulze, a Marysville lawyer who represents Ohio Bar Title, the underwriter for Midwest Title, said more than $1.25 million has been paid to the title company's creditors. Another underwriter, Lawyers Title Insurance Corp., has paid $863,000.
Underwriter Stewart Title Guaranty Co. estimates that First Ohio Title owes at least $900,000 to creditors.
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