Stated Income Fall Out

We have all been reading the newspapers that are filled with numerous stories of home owners getting loans by overstating their income.  This behavior is called bank fraud and there are stiff penalties if one gets caught. 

Now, there is fall out.  I have heard of two things that have begun to happen and they are very interesting indeed.

#1: Husband and wife got a loan.  Husband filled out the loan application with a much higher number than he actually makes.  He put in the number that worked to get the loan he wanted.  Six months later, he and his wife get divorced.  (See where this is going?).  In the divorce proceedings as they are haggling over alimony, the wife pulls out the signed loan application to prove that the husband is making more money than what he is representing for alimony purposes.  So the judge asks him a very simple question, “So Mr. XXXXX, do you make more money than you are now representing or did you commit bank fraud?”

#2: The IRS is digging into these applications and checking against the Federal Tax Returns.  If the loan application says more than what they said on their Federal Tax Returns, the IRS is calculating their tax due on that amount and demanding payment.  OUCH!

If you plan to overstate your income to get a loan, beware!  My simple answer is, don’t do it.