Is seller ( owner ) financing is ILLEGAL with existing mortgage ?

[Tan Mehedi]

Hey community, Is owner financing is illegal with a existing mortgage ? Example , if a house worth say $200k and seller has mortgage balance remaining for $50k . is it illegal to sell that property with seller financing ? i know it can be done through "subject to" or wrap around mortgage but IS IT ILLEGAL ? because one seller says he talked to a attorney and he said its illegal. i wanna get clear on that. This is help all new investors.

[Frank Chin]

The problem is the existing mortgage lender holds the first lien position. Any other mortgages on top of that is in the second position. And most people don't realize banks don't hold on to their mortgages, but sell it, as they need money to do more mortgages. What you'll wind up with is a second mortgage, and I believe you're going for a first. 

Nothing is illegal unless it's done under the table. But what is the bank going to do stuck with the mortgage that they can't sell.