The potential mess is giant. You got that right. What do you think the risks are for anyone that picked up a foreclosed home?
Substantial.
If the parties foreclosed upon want to contest the foreclosure, and the banks submitted fraudulent docs, the foreclosure might be reversed.
In this case, the buyer of a foreclosed property could take a very deep bath. Title insurance policies have a long list of exclusion of what they cover, and if you are a “anyone” who “picked up a foreclosed home,” I’d be pulling out your title insurance policy and reading it VERY carefully, VERY quickly.