Is it illegal for the person who now has the house to just continue making the loan payments without telling the bank that has the house loan? What about the insurance? The taxes? Is any of this fraud? What is the status of the loan of a house when someone dies?
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just get a lawyer that specializes in real estate
http://legal.solutionsarticles.com/easiest-way-to-find-a-lawyer.html
The person that died must have their estate settled. That includes paying off all debts and to avoid settlement is illegal.
you need to find the WILL and then you need a lawyer. if money is still owed on the house it can have a lean put on it. Call the bank to find out what needs to be done.