query: what is the liability to a title company if a heloc winds up in a first position through their error

That's easy.  A mortgage lender who is insured in first position but finds that they are in a subordinate position can make a claim against the loan policy.  This type of discovery typically surfaces during a foreclosure action.

The liability of the title insurer is whatever it takes to fix that up to the amount of the loan policy.

HELOC/open end payoff, satisfaction, reconveyance.....

When you find an "open end" or line of credit/HELOC mortgage on record in a title search, you really need proceed carefully.  Most important is to freeze the account when you get your payoff letter.  You need to stop the moving money target.  There are some lenders who refuse to put a freeze on these accounts so your post closing payoff procedure can include a few extra steps to eliminate risk.  Here are some tips:

1. Add language to the mortgage payoff clause in Schedule B1.  This is what we use:  NOTE:  This is an open line of credit.  The account holder must contact this mortgage lender and request that they freeze the credit line in anticipation of payoff, closure, and satisfaction.
2. Have the mortgagor sign a statement requesting that the account be closed and satisfied.  If the lender does not include this type of statement in the payoff letter, create one yourself.  It is okay to keep it simple and I believe it is best to write it on the payoff letter.  We just legibly handwrite "Please close and satisfy."  We have the mortgagor sign this which does two things for us.  It give us an acknowledgment that the mortgagor is aware of the payoff and has agreed that the account should be closed and satisfied.  This eliminates any confusion over whether they can still use the account after closing and before the payoff is posted.  It also gives them a chance to tell you if they have drawn additional funds after the payoff letter was issued.
3. Send the payoff letter and funds to the lender rather than processing the payoff by wire.  We sometimes have trouble in our office remembering this step.  We are so used to doing payoffs by wire that sometimes an open end account slips through.  If you wire, the lender won't get that "Please close and satisfy." statement which I believe is most effective when received by the lender with the funds.

If after you have paid off the mortgage you have trouble getting the lender to satisfy it of record, don't give up.  We find letters are most effective rather than the phone.  If your first letter doesn't get a response, then send a second via certified mail.  Certified mail is the most effective tool we have to elicit a response from most anyone.  It's the first step in creating a case and it is a recognizable step. ;)

query via e-mail: unsatisfied HELOC

For instance I have a crazy situation where a borrower had a second and when the settlement happened the second was paid off and a new HELOC opened, but the old one was never closed, and even after calling the bank, Chase they did not close it. So the borrower used it and has been paying on it for over a year. Of course he is now in trouble financially. The problem is the new HELOC went into third position, the existing Chase one stayed in second. Isn't that all the title agents fault, Chase and Countrywide for not caring enough to get it all straight.

My guy is worried if he defaults on all of this they will come after him. He simply used a credit line they did not close after pay off. This client would be happy to pay someone for some good advice. Where is the liability? I need to try and negotiate a solution, but don't want to even call the lenders until I have a good handle if they can hold him responsible for this mess.

If the new HELOC lender has a title insurance policy insuring their position, they could make a claim to the title company if they suffer a loss. If they did not put title insurance in place they have no guarantee of lien position. The title agent has the responsibility of paying off the line of credit and if requested, sending a request for satisfaction and closure. They would only step in and have liability moving forward, in my opinion, if there was an insurance policy, owner or loan, that guaranteed an interest coming behind the satisfaction.

The lender who accepted the payoff has an obligation to satisfy - usually there is a state statute that rules - if the borrower or their agent followed the instructions in the payoff letter.

The borrower has an obligation to watch their own finances and control themselves.

That's pretty much it in my book. ;)

Any other thoughts?