As someone who has lived in the US and owned a house there I can tell you that this is not an unusual story. The same problem applies to buying second hand cars in the US of A. If there is an undischarged mortgage to a previous owner the lender has first call on the asset and can foreclose on the owner (whomever that may be). What amazed me is that in the US houses do not have a certificate of title listing the encumbrances, caveats and mortgages as they do here. So a house can be sold without discharging an exisiting mortgage. It is "caveat emptor" in its original form.
