How can a mortgage bank get away with damaging and reporting false information.

If the loan was paid in full when you sold the house, and you can prove that, you should consult an attorney who specializes in consumer law because you may have good claims against the lender. If you have disputed the improper credit reporting with the credit bureaus, and the mortgage company verified the false information in response to your dispute, you may have a good claim against them for violating the Fair Credit Reporting Act. If you have not yet done so and it is still showing up on your credit reports, you need to send each credit bureau where it is an issue a written dispute, along with the proof you have that the loan was paid off, and the recent apology letters. If the mortgage company verifies the information in response to your disputes, you can sue them under the Fair Credit Reporting Act. Make sure to save copies of all credit reports you obtain, your dispute letters, any responses you get, and any proof you were damaged (such as being declined for the recent loan).