Dumb question about carrying the second

[Minna Reid]

Ok - I just dont get it...If a seller carries the second, does that mean he is actually taking out a mortgage for like 20% so that you pay only 80? Or that he's cashing out 20% and giving it to you, or what?
Is it some other simple concept that I'm just missing?
What am I not getting here?

[Jim Gordon]

Minna the primarary lender must be advised of the second mortgage. They will run a tight appraisal on properties that have seller financing on a second because of mortgage fraud. They are being carefull that you are not buying an 80,000 property for 100,000 and having the seller carry back 20,000.
The idea behind doing that is that the buyer can get the property with a lower interst rate and no PMI. The seller after closing under this senario forgives the second mortgage after closing. This puts the lender in the spot of lending 100% of the value instead of the 80% that they thought.

If this is the plan becareful because it is mortgage fraud.