Purchased a used car and found out the title was forged/invalid, what should we do?

We purchased a used car 4 weeks ago from an individual claiming to be a dealer. (car was listed on craigslist) He said the car was bought at an auto auction in another state. The car came with a title. We have already sent in for a transfer to our ownership. Today a major vehicle credit agency contacted us asking questions about the car and previous owners.This agent stated that his company has the original title and there is a lien on this car. Previous owners didn't finish paying for it. (this agent got our phone number from a local dealership after we took the car in for a diagnostics check) We told him everything we knew about our purchase. He is going to investigate further...so where does this leave us?..what should we do in the mean time to protect ourselves? - Is this your question? Add additional information