I Should Have Checked That Legal Description (Mortgage Recorded Against the Wrong Property)
When our insured lenders loan on Lot 1 went into default, a foreclosure complaint was filed against the person in title to the land described in the mortgage. The titleholders answer denied that they had a loan with the Insured. The insured notified the Company, and during investigation, it was discovered that the insureds borrower had several loans with the insured on different lots in the community; and that the mortgage on Lot 1 should have been recorded against Lot 2.
The borrower had previously sold Lot 2 to a purchaser but continued to make mortgage payments. The borrower then passed away.
When the Company was notified of the problem, it discovered that the borrowers estate was still open and claims were immediately filed against the estate on behalf of the lender and the title insurer. The personal representative of the estate has agreed to pay the balance due plus interest on the mortgage debt.
So the insured lender was able to recover its unpaid principal and interest because of the insurance it had received under its loan policy.