In most instances the lender bank sold the loan to a servicing company while promising to keep the hard copy files on hand, but have either misplaced, or have little inclination to produce the hard copy as they have already sold their interest in the property. Often the documents where sent but misplaced in mega warehouses under another warehouse servicing company all together.
The fact that they have clear title will be seen when the squatter finally abandons the property and it is sold at auction for tax purposes. At that time the taxes will be paid and any remaining proceeds from auction will go to the lean holder.
The squatter will never own the property they are simply getting free rent.
“They do have clear title. They simply have digitized the paperwork and misplaced the hard copies.”
No they don’t. In some cases they have digitized paperwork, which is not compliant with local laws.
In many cases they don’t have any paperwork except the mortgage. Only they can’t even prove they are the legitimate owner of the mortgage because those were all lumped together and shuffled around.