Newsflash: Lender flagged encroachment

Any advice for us as buyers? We went under contract in April. The sellers disclosed a driveway encroachment at the time of sale in April. We immediately became gun shy as the legal remedy they had with the neighbors was actually not done properly. As we liked the home, we offered to correct the issue and hired an attorney and paid out of our own pocket to remedy the situation. As we went through the inspection, the sellers refused to make any repairs or address any concerns, but we still caved because we wanted the property. Lender cleared us to close 10-12 days before the scheduled closing which is next week. Then, just 8 days before closing, the lender called us as well as the closing attorney and notified us that the underwriters found an undisclosed encroachment. They explained that jumbo loans have a higher level of scrutiny. We are confused as to why they would clear it, then tell us about a previously undisclosed encroachment after the fact, yet still tell us that we can close if we want to with the title defect.Now, with the SECOND undisclosed encroachment that was known by the sellers for over two years, we do not wish to move forward. We feel that without knowing this, we were prevented from making well informed decisions about the property and were engaged in negotiations that were done in bad faithWe are now being told/threatened that we may in essence be forced to close under duress for fear of litigation. They are implying that the encroachment is not a big deal because the lender says that they will still insure the title, though it is still technically a title defect. We are being told that future buyers won’t care about it, but that we will be obligated to disclose it. We are so confused as to why we are being forced to accept this liability that wasn’t disclosed to us, but we must disclose to others so they can use it in their decision-making process, even though it was denied to us and our decision-making process.Please make it make sense.