contract for deed questions

I bought a home in OK contract for deed 3 years ago. This home was on an ARM mortgage. I am now trying to refinance the home to get a fixed rate and to have it put into my name. During this process I have discovered that the person who sold me the home had put a 2nd mortgage on the home after I had bought it. I also discovered that this 2nd mortgage had not been paid for almost a year. I tried to get enough through my refinance to cover both loans but the lender told me that the nonpayment on the 2nd mortgage reflects on my credit because i now own the home. Is this true? Also is there anything that I can do legally about a second mortgage being put on a home that I purchased contract for deed, without my knowledge. This contract has been filed with the court clerk.