Buckeyes,
There is a big difference between lying on a loan application and not sending in a letter to a lender of a sub2 deal.
Lying on a loan app is a federal crime. What makes it unethical is the fact that you have to break the law to do it.
Taking a property Subject to the existing mortgage is not a crime (at least, not a federal crime, though some states are trying to make laws against it). In fact, there is a line on the HUD-1 form for subject to.
I do have a problem with trying to conceal the sell of a sub2 property by having the seller put title into a landtrust, for “asset protection.” before the investor will close on the deal. That, too is fraud (and in NC, is viewed as such).
Actually, you should notify the lender that you (or rather your company) will be making the payments and that all correspondences should be sent to you (whoever is on the loan will have to give written permission).
Some lenders have starting recording a form that requires the closing agent to inform them of any change in title. In those cases, you are legally required to inform the lender (another reason not to do kitchen table closings, btw). Otherwise, there is no legal requirement to do more than necessary to get the deal.
In my opinion, Buckeyes, you’re correct. Most lenders are much more happy collecting the payments, from anyone, rather than have a non-performing possibly foreclosed, loan on their books. By the same token, sending in a letter stating that you’ve just bought the property subject to the existing mortgage, the deed is now in your name, is kind of like rubbing their noses in it. Whether they want to send notice or not, some may fill that that kind of letter would FORCE them to act upon it. At best, I feel that they would require you to formally assume the loan.
Better to keep it an open secret, than yelling to the bank, “Nana-nana, boo-boo!”
Just my thoughts,
Raj