"Gifted prop" but not really and want to use HELOC...Stupid?

[Greg Watkins]

Here is the situation/hypothetical,

Lets use the name Bob. Bob owns a property worth $210,000 and still owes 150,000. Thing is, no one knows that he owes this and it appears he owns it outright. (personal loan/mortgage from a family member) Bob would like to take a HELOC out of the property for about 160,000 to invest in Real Estate. Bob with obviously have to pay his "hidden mortgage" and the HELOC back at the same time and will rely on the investment properties to pay back the HELOC. Is Bob.. Stupid, Dangerous, Smart? Obviously dishonest, because he will tell banks he does not pay a mortgage. Overall question here is though, How risky is this move?

Thank you all