They only lend on 70% or less of the ARV, so that leaves them room to recover their capital if someone defaults on a loan.

Make sure any bills that were part of their rent (eg electricity) are paid in full OR if they are unpaid that they do not default to you.Are you renting it out right away or do you have a vacancy? 

Issue is getting the seller to go for it.. unless there is a formal assumption and the seller is relieved of their liability to the existing mortgage the seller remains on the loan and therefore if its a loan reported to fico it stays there and if its a loan that has a possible deficiency judgement against the owner that stays there.So its no issue really for you as a Buyer the main issue is risk to the seller  IE you default and the seller is in some tight spots.. they have a mortgage in their name but do not own the asset you do. 

Default is sell within 6 months if you can't come to an agreement, btw.

If things go too far too fast, then the market could overreact and cap rates could go up to fast, creating a wave of defaults etc.    

and possibly having to use your own money to pay the mortgage, if the tenant defaults?

I used to love phone calls, but after many miscommunications with owners and tenants “forgetting” conversations after they happen, we have defaulted to writing as much as possible.

If you are given a loan on a property and default, the bank or HML will take back the asset and try and liquidate as fast a possible.

I was made aware from a relative that their neighbor was in default and needed help.

As long as the outcome isn't default.