I purchased a truck from a dealership, the bank approved the loan and funded it. Now the dealer is killing the loan because they messed up and did not have clear title for it. Is this leagal?

Yes.. because otherwise you have a vehicle they can NOT convey a clear title to you.

Apparently the sale took place expecting the title to come through clear and free of encumberances from where they got it from... and apparently they did not find out before the sale took place.

This is a vehicle they can not sell to someone until and unless that problem can get resolved now that the problem has been discovered.

Without knowing the problem exactly.. it can be any number of things. It can be easy and quick or it might be expensive and time consuming.. its even possible it might not be possible to correct by them.

I'm hung up on the word "repossessed." It sounds like the contract/agreement was cancelled or revoked.

Where and what are the exact details - such as, who said what?