The loan servicing department received a payoff request on a mortgage loan. The request didn't have a loan number but did have a collateral description. The customer in question has several mortgages with our bank. When the clerk typed up the payoff letter, he picked the wrong loan, wrong collateral address (he typed this figures/description on his letter) and ultimately the wrong payoff amount. The figure he quoted was actually $125K less than the one that the refi bank wanted from us. Settlement attorney just caught the error, 4 weeks after closing. All other funds have been disbursed. Now what?

Payoff quote had the incorrect amount, but correct property description.
Is your borrower balking on paying the difference? Have you sent the "Paid" Note to the borrower or released the mtg?
I would consult your attorney ASAP. The seller should have known the amount was incorrect on the face of it. There is some legal principal about unjust enrichment.