"Just trying to get a grasp of whether or not I am overreacting here"
Yes and no. Big effup on their part but [bleep] happens, focus on solving the problem and ignore the pissed off part. Get thee to an attorney NOW. State law varies, here I'd get you a release of lien ASAP and walk it to the court house for filing with a copy of the recorded document you can hand to the lender.
