So they would first payoff the first mortgage, if there is a second then $ goes to the second and if anything above that goes to any other lienholders or the homeowner.There are a lot of people who invest in 2nd mortgages because they are cheaper than a first, but in Ohio (not sure all counties) you have to pay off the first at foreclosure so if you do not have the money to pay off the first you are out of luck. 

Living closer to work saves time and money.

I bought this property with a private interest free loan from a friend. the person i bought it from need cash fast so i offered them a low cash offer and they accepted.I had enough money saved up to rehab the house with my savings.

That makes a big difference in the answer to what Charles eloquently referenced regarding confidence in your ability to close. 

Looking for a turn around scanrio is an ego pleaser, makes for a great story if it works, but high risk it will never pan out the way you thought.

Looking to make $450 a month in cash flow.What made you interested in investing in this type of deal?

Instead of shelling out $60K for a $250K deal, maybe some of you can help me figure out (or give referrals) to title companies, etc, or give overall advice how to save me money from this enormous financial endeavor (closing the deal).Thanks!

I had no idea they would decline me for MY OWN MONEY technically.   

Should I file suit to make them sell the property?

They must be very low odds because insurance companies are in the business of making money, not paying out maximums.