By Alison Rice. It's the ultimate story of caveat emptor. A buyer closes on a new home only to discover that the property has two mortgages: his and the builder's.

That's the situation in Cincinnati, where The Erpenbeck Co., an Edgewood, Ky.-based builder, is under investigation for allegedly depositing closing checks intended to pay off construction loans into the builder's bank account instead.

No federal criminal charges have been filed, but the investigation, which involves FBI agents from Cincinnati and Louisville, Ky., represents "a significant case," according to FBI spokesperson Ed Boldt.

While the FBI investigates, the U.S. Attorney's office has tied up key assets, such as the $1.3 million home of A. William Erpenbeck, the former president, and properties belonging to bank officials involved in the case. Erpenbeck's lawyer, Glenn Whitaker, had no comment on the investigation.

Unfortunately for The Erpenbeck Co., the FBI investigation qualifies as just one of the legal and financial problems it's facing, from angry homeowners and municipal officials to unpaid lenders and subcontractors. Losses may range as high as $75 million, according to The Cincinnati Enquirer.

Left in the middle are about 200 owners who don't have clear title to their homes. They've filed a class-action lawsuit against Peoples Bank of Northern Kentucky, which accepted the allegedly misdeposited checks. "There is a 100 percent liability on the bank's part not to put a check into another person's account," says Stan Chesley, the lawyer representing Erpenbeck buyers.

Builders like The Drees Co., Cincinnati's largest home builder, say they haven't been affected by the revelations. "We never do that anyway," says Terry Sievers, Drees' Midwest regional president, alluding to the practice of taking checks at closing to pay off a construction loan. "The bigger builders don't have payoffs. It's all paid through the builder's line of credit."