Lenders have liability in these matters, they MAY NOTY discuss any confidential loan information with anyone who is not a party to the note unless a. they are selling the note to a qualified registered lender/buyer, b. the borrower has passed and they will be assisting in an estate settlement as would be directed by the court, c. if directed by any court to disclose information, such as in bankruptcy, or d. the borrower has authorized disclosure as it relates to a specific purpose, lastly, to an attorney representing the borrower.

The insurance settlement exceeded the cost plus it sure was nice getting everything repaired 'turn key' where I did nothing.The common denominators here are LOW INCOME TENANT along with COOKING IMPAIRED.While I cannot raise the IQ of my tenants, they now all have fire extinguishers...

You got a summons because you will turn it over to your insurance , your insurance will decide if it is cost effective to fight or pay a settlement .

All of the $61K equity you will receive at settlement is most likely not profit -- some of it is probably a return of capital (which is tax free).

Or worse allow the tenant to terminate their lease and you will not receive any settlement.

at this point you have nothing.. and it sounds like you have a vendor who does not know what they are doing either.you have no note no collateral.. this person worse case could just vanish along with your money  :)  not saying that will happen.we ALWAYS in our business go through title and escrow just like a home purchase cost a few bucks but we know its insured we know it gets recorded we have settlement statement.. etc etc..

See buyer settlement statement here: https://imgur.com/a/FBiI4tlSo, after closing, we still had $15,655.56 of money we had raised (from the loans) sitting in our joint account.

I recommend that you STOP immediately, and have an attorney contact the owner, explain what happened, that you're very sorry, that the mother in law is old country and didn't know the laws, and come to a settlement with the owner of the property for the destruction you've wrought, before the owner tries to have you arrested.

We've held up closing for the permits to be satisfied prior to settlement, or asked sellers to compensate buyer X for a licensed plumber / electrician etc to do the work within so many days.

You can try to address this judgement in the short sales paperwork by including a statement to the effect that the amount(s) paid is the full and final settlement of the debt.