A Louisiana lender got burned when a title agent failed to cancel a $575,000 mortgage – now the courts are deciding who’s really on the hook
A $575,000 mortgage wasn’t cancelled at closing, triggering a legal fight over title agent duties and lender risk that every mortgage pro should note.
Here’s what happened. Back in December 2017, Nicholas and Sara Gregory bought a property in Monroe, Louisiana. They got a mortgage from Progressive Bank to help pay for it. The closing was handled by Landowners Title of Ouachita, whose job was to make sure the property was free of any old debts. But there was a big one: a $575,000 mortgage owed to Homeland Federal Savings Bank. Everyone expected Landowners to get that old mortgage wiped out before the Gregorys took ownership.
Landowners said they got a verbal promise from Homeland’s staff that the mortgage would be cancelled, no payment needed. So, the sale went through, the Gregorys moved in, and Progressive Bank’s mortgage was recorded. But, as it turns out, Homeland never actually cancelled the old mortgage. The sellers, Ronnie and Sharon Ward, got their money but didn’t use it to pay off the debt. Eight days after closing, Landowners tried to get the paperwork sorted, but Homeland didn’t sign off. Fast-forward to 2019, and the Gregorys discovered the old mortgage was still hanging over their heads. Homeland started threatening foreclosure.
To protect themselves, the Gregorys had bought title insurance from First American Title Insurance Company. When the problem came to light, First American paid out the full $575,000 policy limit. The Gregorys then used that money to pay off Homeland and finally clear the title. But by then, they’d lost their title insurance coverage, and Progressive Bank was left out of the picture.
The Gregorys and Progressive Bank took Landowners and its insurer, Continental Casualty, to court. Their argument was simple: Landowners was supposed to make sure the old mortgage was cancelled, and because they didn’t, the Gregorys ended up in a mess. Landowners fired back, saying the Gregorys hadn’t actually lost anything since the insurance company covered the bill.
The first judge agreed with Landowners, saying the Gregorys didn’t have any real losses because the insurance company stepped in. The judge didn’t see a reason to make Landowners pay up, since giving the Gregorys more money would be a double dip. Both sides were told to pay their own legal fees.
But on November 19, 2025, the Louisiana Second Circuit Court of Appeal had a different take. The appeals court said there were still some big questions to answer – like whether the insurance company could claim the Gregorys’ rights and whether paying out the insurance really made the Gregorys whole. The court sent the case back for more hearings, so it’s not over yet.
For mortgage professionals, this case is a wake-up call. It’s a real-world reminder that relying on a handshake or a verbal promise isn’t enough when it comes to clearing old debts on a property. If the paperwork isn’t perfect, lenders and buyers can end up in a legal maze, even years after closing. Title insurance can be a lifesaver, but it’s not a cure-all – especially if it means losing coverage for future problems.
The takeaway? Double-check every step, keep the communication lines open, and don’t leave any loose ends at closing. The stakes are just too high to risk a $575,000 mistake.
