The meltdown of title-insurance company LandAmerica Financial Group Inc. has left scores of real-estate investors and entrepreneurs scrambling to recover money in what were supposed to be a short-term and no-risk arrangement. The investors, from Arizona retirees to a public company, had $400 million on deposit with the LandAmerica subsidiary to take advantage of a real-estate strategy known as a 1031 exchange. A 1031 exchange, named for a section of the U.S. tax code, lets investors delay capital-gains taxes on the proceeds from recently sold property, as long as the investor lets a third party hold the funds. They must reinvest the money in a new property within six months.

At the law firm of William A. Miller in Phoenix, we often tell client’s to go ahead and pay taxes now because the tax rates are historically low and buying again, may well not be wise. Yet, here is a reputable title-insurance company holding 1031 money until such time as the investor decides to reinvest it and poof, it’s gone.

If a lawyer does this in Arizona he loses his license and likely goes to jail. Why; because in Arizona lawyers cannot co-mingle funds. This is a historic wrong and once again, blood will flow in the streets and the lawyers will make a small fortune. What a mess. Someone needs to serve time based on these poor folks losing their hard earned money.

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If you could invest in a law firm, this would be a good time. According to the WSJ, the number of consumers with delinquent mortgages is poised to almost double by the end of next year, hitting its highest level in at least 16 years, according to a leading credit bureau.

TransUnion LLC, which analyzed about 27 million consumer records in its database, predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009.

That would be the highest level reached since the Chicago credit bureau — which is releasing the data on Tuesday — started keeping track. I wonder how many of these defaults are occurring because the lenders have told the shaky borrowers that the must miss payments  before they can rework the loan. As my kids say, this is just great. There is little doubt this will lead to many more Arizona lawsuits.