Hi Agents I have a client trying to do a short sale. He will not sign a 4506 t because he over stated his income on loan.

Asked by Bren Johnson, Litchfield Park, AZ Sat May 1, 2010

Will he have to worry about loan fraud and the bank coming after him. He made a lot of money it was mostly capital appreciation he did not claim on taxes. His loan officer said that is why they have stated loans for self employed because a lot of times they do not claim every penny. So my question is can it be loan fraud if he did not cliam it on taxes but really made it???

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Anna M Brocco, Agent, Williston Park, NY
Sat May 1, 2010
For an accurate answer, tell your client to consult with an attorney who specializes in real estate.
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Dp2, , Virginia
Sat May 1, 2010
IMHO, that loan officer made an ignorant comment. Stated income loans are useful when used correctly.

That seller will get caught by the lender, attorney general, FBI, IRS, or another agency. He'll be prosecuted, and he'll be fined and/or jailed for loan fraud. Doesn't he realize that there's a massive witch-hunt going on, and that lots of people are turning over every pebble to unearth any and all forms of fraud? If he still insists on pursuing things this way, then maybe you should recommend him a good attorney and schedule a fitting for one of those "lovely" orange jumpsuits.
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Don Tepper, Agent, Burke, VA
Sat May 1, 2010
That's a question only his lawyer can advise him on.

However, my gut reaction is that he had plenty of company. There's a good reason why stated income loans got known as "liar loans."

But you seem to be describing two different situations. He "overstated his income on loan." OK, he said he earned more than he actually did. That was the typical pattern. Possibly the lender could attempt to come after him for overstating his income.

The second situation is that "he made a lot of money . . . he did not claim on taxes." That's another issue. And that's one the IRS might care about. I'm not a lawyer or an accountant, but I might be more concerned that the IRS might come after me for additional taxes on income not claimed.

So, urge him to speak to a lawyer or tax professional and weigh the options: incurring the wrath of the lender for overstating his income, or incurring the wrath of the IRS on not declaring the income on his taxes.

Hope that helps.
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