The Russian Mafia Did It! I swear. Homeowners Stuck If Their Refinance Money Is Stolen During A Wire Transfer

Back in August, I posted a story about how a title company in suburban Denver claimed the Russian Mafia hacked a wire transfer for $277,000 when they transferred funds to JPMorgan Chase to pay off a client’s mortgage. Now the story is in the Denver Post.  The homeowners are now on the hook for the $277,000 and have lost their house because the title company wasn’t insured.    I find this story hard to believe because all mortgage transactions are wired through the federal reserve database as dictated in the Patriot Act.  -Steve

From The Denver Post

Tim and Kim Canning of Parker did what tens of thousands of other Coloradans do eah 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.

“Sure, we can go after the title company for the money, but that’s like squeezing a turnip,” Kim Canning said. “And for the banks, $277,000 is like nickels, but for us it’s a world turned upside down.”

Classic Title’s president, Ryan Rodenbeck, did not return calls seeking comment.

Though the couple paid for a title policy as part of the refinancing process in 2009 — most consumers do this and don’t even know it doesn’t actually cover them — the bank that loaned them the funds is the one protected, not the Cannings.

When the money was stolen, the original holder of their mortgage wasn’t paid off — in this case Bank of America — so the Cannings suddenly found themselves with two mortgages on the same house.

And both banks wanted to be paid, though the Cannings thought they only had one mortgage, the new one, so that’s the one they paid.

It wasn’t long before Bank of America’s late-payment notices showed up in the mail, the telephone calls started and the foreclosure notices appeared on the front door.

“We just thought it was a paperwork problem,” Kim Canning said, having explained to Bank of America that they’d refinanced the note and the papers must be hung up in the mail. “We were getting delinquent notices and I was shredding them. That’s how clueless I was.”

Then came the news: Their money — actually it was MetLife’s money, the holder of their new mortgage — had been stolen from Classic Title’s escrow account at Chase Bank, along with nearly $1 million in the account that made up eight other real estate deals.

Read more:

Homeowners stuck if refinance money is stolen

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