car delerships mistake

[sarahd]

my husband and i bought a used car frm a local reputible dealer here in maryland in dec. of 2000. We signed all paperwork for our loan. Now the dealership tells us 5 months later that our loan was denied and is demanding $500 or they will reposess the car. My husband and i sent all payment in and our checks were sent back to us by the finance company with no explination why. I called the finance company when i recieved the checks back to find out why. I was told that they were sent back because the paperwork had not gone trough the computer yet and to keep sending the payments. when the dealership first contacted us a few days ago we were told that there was a mistake on our title and to bring it in so they could fix the mistake. When we went in they then told us our loan had been denied back in dec. when we asked why we were not notified we were told that they wanted to wait a couple of weeks to retry to see if we would be approved. when we asked why we were not notified after we were denied the second time they gave us the runaround. they took the title and would not give it back to us. they would only give us a copy. they won't work with us on this. we have asked them to let us start our payments over again and they have refused. they told us that getting a lawyer would not help, ( we never mentiond anything about getting a lawyer to them) Can they legally do this? Have they done anything wrong legally?
my husband and i canot afford a lawyer and none of the lawyers in our area will give us a free consultaion. Noone wants to help us. Someone please help us. this is not some rinkydink operation. it is a large reputible dealer that has 7 locations and sells mainly new cars