Legal Question in Real Estate Law in New York

Re: Closed on house, mortgage broker stopped payment to sellers.

You did not state whether or not you had an attorney representing you at the closing. If so, it was his responsibility to see that good funds were in his account at the closing. How were closing funds disbursed? Did you just endorse the mortgage check to the Seller or did it go through the attorney's trust account? If the latter, he may have responsibility in this also. Whose check was issued for the mortgage proceeds, the brokers or the original lender? If the broker has actually filed for bankruptcy, you probably cannot file a civil suit, but may have a possible criminal charge for fraud. Also, if the funds you were to receive should have been the actual lender's funds, you may also have a claim against them. Have you contacted the original lender to advise of the situation? They may have insurance to cover this or may be willing to replace the funds (probably a small chance). Also, does the broker have errors and omissions insurance. You may have a claim against his insurer.

Your attorney should check this, and, if he issued the closing check, he has exposure for an ethics violation for not having good funds to close. Unfortunately, you also have the exposure to the Seller for delivery of insufficient funds as it is ultimately your responsibility, although you may have recourse against other parties.