And how do you propose that the identity of the person or entity that paid the taxes would indicate that there's a potential cloud on the title? People routinely escrow their taxes and have them paid by their mortgage lender or servicer.
The issue under debate is not whether the bank made a mistake and should fix things, as would appear to be the case. It's the fantasy that this would fall under title insurance. That said, if the bank wants to sell property REO with an outstanding tax liability, it is free to do so.Quoting budwad
Because the title was clear at closing.Quoting budwad
Even if I bought into the view that the title company had to investigate who paid the property taxes, and then follow up with them to find out if they were reimbursed if it were anybody but the title owner, it would be ludicrous to suggest that they had to do so over and over and over right up to the moment of closing "just in case" something new happened. Had a tax debt been discovered and had the bank agreed to pay it off prior to closing, it would be reasonable to expect that the payoff would be verified; but we're speaking of a situation in which there was neither a tax debt that could have been discovered nor a lien resulting from its payoff.

