Evidently, in Georgia real estate closings are routinely handled by lawyers who use their trust accounts as the escrow. Last month a large mortgage company in Georgia, HomeBanc, filed for bankruptcy. In doing so it bounced 134 checks written to attorneys acting as closing agents. Those attorneys had already deposited the checks into their trust accounts and immediately disbursed funds at closing. Needless, to say, they were each left holding a very large bag.
Most real estate closings are funded by wire transfer, but HomeBanc was a huge lender in Atlanta who figured out that there was money to be made on the float. According to the article the attorneys in question have found ways to cover the overdrafts — either with home equity loans on their own homes or with a claim on their errors and ommissions policies. How’s that for a solution? The bright side is that the Bankruptcy Court is giving them some relief. The loans in question are being assigned to the attorneys who will then be able to sell them for whatever they can get for them or service them themselves.
Real estate work (well actually title work, but close enough) was once described to me as 20 years of utter boredom followed by 15 minutes of sheer panic. I think I will stay out of it.