What's the reason banks ask if owner occupies the property or not?

I have this type of situation in New Hampshire and I am wondering if anyone can shed light. Here is the scenario; After 8 months of trying to get a short sale approved for my seller whose home had already been on the market unsuccessfully for a year the mortgage company finally granted the hardship sale. The buyer who had been waiting seven of the eight months was given less than 30 days to close the property before per diems were charged. This made everyone scramble. A home inspection was conducted including a septic inspection and everything came back great the buyer was ready to move forward. An appointment was set with the appraiser and when I met her at the property my lock box was gone and another was in its place. There was the tag on the door telling whoever was interested who they could contact. I immediately called the mortgage company and after a couple of hours I was informed that there was a mistake and that it was the fault of the contractor hired by the bank. The following day I was contacted and given a code to get into the property. I then rescheduled the appraiser and returned to the property 3 days later. When we went into the finished lower level to inspect we found that the basement was flooded. The water pipe was disconnected and water had dripped onto the carpet for 4 days. There is additional damage to sheet rock walls and wood paneled walls. The buyer also has some concern of the possibility of future mold problems. Does anyone know who is ultimately responsible for the damage?

The lender who mistakenly ordered this is responsible (non-legal opinion, of course). They will probably go back and hit the contractor for the costs. But you need to act on this immediately. Wouldn't hurt to have buyer's attorney in on this as well to add to the push.

Steele