Clearly, if you needed to turn to this forum, you are not getting good information from your Buyer's agent.
If you used the Seller's agent you can still demand answers. If you are not getting answers, you should turn to the agent's broker and to the escrow company for a response. Call them.
The escrow company, who is to be a neutral party, can guide you as to whether they can return your earnest money. That will give you a clue as to whether you can terminate the contact. But, don't give up just yet. Ask the escrow company what the delay is. It may be that they can't yet get you clear title and won't proceed until a cloud on the title (defect or error in who the current owner is-ie who has the right to sell the property) is fixed. They can also give you an estimate of the time frame which will help you make a decision.
In Arizona, if you used the standard real estate contract, you must give the seller 3 days notice to cure the contract breach (ie. not providing clear title on time to close). Your Buyer's agent or his Broker (boss) should send this to the seller when you tell them to do so. Send a copy to title/escrow as well.
Last resort, seek legal advice from a Real Estate lawyer.
And no: all Fannie Mae deals are not like this, but on any real estate transaction there are always problems that come up that we Buyer's agents get to help solve. I hope you are able to get improved communication with your agent. Good Luck!
Talk to your Buyer's agent. Usually you have a date to close on your contract, your contract will state/dictate how and if you can cancel the contract.
Title issues DO come up with foreclosed homes - in fact I had a title issue with a house I have in process. But often the issues can be resolved in a couple of weeks.
And what I've discovered is they won't set a firm closing date until title is clear. But that doesn't mean all work has stopped on escrow.