Part of the deal is that after the borrower pays-off the loan, they get clear title to the property.
If the lender can no longer provide a clear title to the property, the borrower should return the property to the lender, the lender should return all payments made to that point, and make no adverse notations on the borrower's credit record.
The lender can then resell the house once they can straighten out the title.
If they can't straighten out the title, "sucks to be them".
Ding!
I ran into something similar over a car loan.
I missed one payment, was late on the next, made a double payment including late fees that were never properly credited...and entered a nightmare.
The bank “sold” my (actual)loan balance to a collection agency, but apparantly did not include the title in the transaction.
My credit rating was shot, but even if I paid the collection agency, I still would not acquire the “title” to my car (according to the collection agency).
So why would I pay a collection agency an amount I do not dispute I owed on the loan balance, when I would still never “own” the car?
Are these mortgage buyers in the same catch 22?
That any payments they make now will not be credited to their account?
That really is the kicker - who knows how many homeowners will find themselves without clear title even though they’ve made all the payments!
You did give me a good giggle imagining the lender returning you all your mtg payments “mid-loan” in exchange for the property because they can’t deliver clear title - that was a good one! ;-)
Let me know if it works ... ;-)