Payoff letter from mortgage company

After refinancing for a new mortgage, the mortgage company being paid off notified the title insurance company that they had disclosed the incorrect figures in the payoff letter sent to the title company. They had discovered that they had not included a prepayment penalty. The title company is saying that they do not insure against this kind of mistake. The original mortgage company says they will not accept the funds wired, even though it is the digure they disclosed in writing, signed by a bank officer. Who is responsible for this bank error when all paper work has been filed and we as borrowers did everything in good faith?

Title company's offer insurance on the fact that title is clearly held by owner; these policies have nothing to do with mortgages.

If I understand your question correctly the old mortgage company says you still owe money because they did not include the prepayment penalty in calculating the "payoff" amount. Until you have satisfied the first mortgage, you are liable to both debtors. In your original mortgage there's propbably a penalty clause for prepayment; to me you are as much as fault as they in not noticing that that penalty was not included. I can't see a lawsuit here; talk to the new mortgage company about increasing the amount of the new loan to cover the full amount.