Doing a "subject To" with land trust could put me in Jail?

[Jack Ni]

I was reading lease option and subject to deals by Wendy Patton. In her book she said if a investor put a deed in a land trust to cover up the due on sale clause, this action could be consider a mortgage fraud; because if a court rules that the intent was to keep the bank from exercising its legitimate rights by hiding an important fact (deed transfer), I can be accuse of mortgage fraud. I did some research on mortgage fraud, it's a serious crime, it could land me in jail for a long time because we are dealing with a large sum of money. 

I don't know how Wendy Patton got that theory, and I have no way to verify if her theory is actually true. I would argue that if a investor puts a deed in a land trust, he is simply taking advantage of the law not committing a fraud. 

If you are a loan officer for a bank, would you consider this a fraud? Are you aware of any laws or clause that would build a case for the bank to sue the investors for "subject to" deal with land trust? If you have a subject to deal and it's in a land trust, would you be worry about being sue for fraud? 

What is the worst case scenario? Would I go to jail for hiding the deed?  Hypothetically

[Blair Poelman]

Wendy is right - but there's a lot to consider when it come to fraud.

There are several types of fraud - most have to do with intent and the actions taken prior to, during, and after the fraud takes place - and all can be argued one way or another.

Pretty much every single purchase money loan has a due on sale clause - if you are maliciously trying to sell a property without paying off the loan, yes, that's Intentional Positive Fraud and you can get cracked on it pretty good.  I know a couple guys in my home town that served 5+ years in a federal prison for this.

If you're moving ownership into a land trust that you also control and have no intention of defaulting or selling and avoiding the payoff, it could for sure be argued as positive fraud, but the intent would more likely be for something like asset protection or some kind of investment arbitrage - which could still be fraud.  

If you were doing it as an investor with somebody else's ownership, that gets kind of messy.  Lots and lots and LOTS of stuff in this business can be construed as fraud. Some is, some isn't - so If you're serious about getting "creative", you really need to come up with a solid biz plan and consult with an attorney who can help you to put yourself in a defendable position with whatever strategy you come up with / engage in.