I beleive Pamela held title with her ex-husband (as tenants in common), and she was entitled to possession per the divorce decree.  Husband was the only one on the note.  It appears that the bank argued that because "Jeffrey" was no longer making payments, due to his death, the mortgage was in default. Although Pamela continued to make payments for a while, the bank eventually refused to accept them.

The only reason I can think of that they would want to do that is because in the event of a future default, nobody was personally liable on the note for any deficiency. And, the note wasn't necessarily a mistake - I see this done occassionally.