Legal Question in Real Estate Law in California

Well, the consequences would probably depend upon whether the omission was negligent or intentional; in order for there to be fraud, the perpetrator must have an intent to deceive. As a practical matter, such an omission is not likely to fool a buyer or lender, because loans secured by a deed of trust are ordinarily and routinely recorded, and buyers and new lenders almost always check the official records, either personally or through the title insurer. Nevertheless, there are occasional instances of "do it yourself" real-estate sales and financings in which an amateur participant may fail to check the records, or where something wasn't recorded. If you have knowledge of someone attempting to engage in such activity, whether through personal negligence or an attempt to defraud, the first thing to consider doing is to advise the person, as gently as possible, that you notice they seem to be making a mistake. You could then go to the county recorder and make sure that the loan you suspect is being excluded from mention actually appears as a recorder lien against the property in question. Whether you should finally approach the buyer or new lender that might be deluded by not knowing about this existing loan depends upon your circumstances with respect to the persons involved and the property itself.