Not an attorney. Just interested in the subject.

I think there are multiple issues going on here. Without court intervention looks like the lender has lost the rights to real property resulting in this debt becoming an unsecured debt. If the debt is unpaid, (I suspect it is) their recourse is against the debtor personally and not the property. 

Of course, they can throw their selves on the mercy of the court and ask to have the instrument “re-formed” and will likely win that battle. The court hears and will have sympathy for the intent of the parties.  But that’s not our job. Record title is what we are about. 

Great place for the discussion of whether or not the original “error” was blatant enough to invalidate the lien sought to be created or was just cosmetic in nature. We will leave that discussion for another day. 

First up is the issue of the certificate of satisfaction. The land records, so far as notice to innocent purchasers for value……until the re-recording, shows a clear title. That’s the standard of care. The lender, through their own act, released the property from the lien of the debt. Any purchaser was rightly without notice of the debt still owning between the original debtor and the lender. Sorry, for your luck lender. The new purchase would be, I believe, free and clear of the released mortgage. Lender is left to collect just like any other unsecured creditor.  Lender better hope the seller hasn’t squandered the proceeds. 

Next issue is the re-recording of the Mortgage. If it was re-acknowledged by the debtor, I’d say it’s a good lien. If not, its technically invalidly recorded and fails to create a valid lien of record. Another boo boo on the lender’s part. Creating yet another instance where (without court intervention) the lender’s recourse is against the debtor personally as an unsecured creditor. 

What they have created is a title quagmire. I’d be covering my tracks as an examiner on both sides of the issue. Reporting the lien as a title objection for down line purchasers/lenders.  AND also take the position of objecting to the manner of its recording, if asked to insure the re-recording as a valid lien. Nice mess.