Yes, you are obligated to point it out to them. I cannot tell from your question, but you will, no doubt, be promising to give this new lender either a valid first (or second) lien and they will object if/when they learn they are in the third lien position. This is an event of default that will give them grounds to foreclose the mortgage.
My answer is for general purposes only and is not not intended to establish an attorney-client relationship, nor is it advice upon which you should act or rely. But, if you really want me to tell you something upon which you can actually rely: don't eat yellow snow.
They will disdcover it when they do the title report prior to closing. In any event, you are obligated to disclose it on your application. To do otherwise would be to commit loan fraud.
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Tell the truth. You will need to certify your income and expenses for the refi. The second mortgage expense should show up on your monthly expenses. Also, the lender will run a title search and the second mortgage will show up.
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Yes you are obligated to point it out to them on your mortgage application. You are just kicking the can down the road because the mortgage wil be discovered after a commitment is issued and the title report comes back.
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