Inflated Income on Loan Application Could Be an Honest Mistake -- or Fraud

Section 1001 makes it a crime to "knowingly and willfully" make false statements for the purpose of obtaining a mortgage loan. If you voluntarily admit to the mistake, I doubt that you will have any criminal problems because it will be difficult to prove that you meet the "knowing and willful" test.

You admit that you are in financial trouble. That's another reason why you should immediately discuss your situation with the lender. The lender may agree to work with you and offer you some options.

· The lender may give you time to sell your condominium and temporarily freeze your mortgage payments. If you are able to sell -- and if there is sufficient equity in your unit -- the missed payments will be added to the mortgage payoff at closing.

· The lender may agree to a short sale, whereby the lender will accept a payment that is less than you owe, which could assist you in selling your unit. You should consult a real estate broker who is knowledgeable about short sales and has sold property in your area.

· The lender may allow you to give back the unit via a "deed in lieu of foreclosure." This means that you will sign a deed, giving the unit to the lender. This way, the lender will avoid the costs involved in foreclosing. You should inquire about how such a procedure will affect your credit rating.

· The lender may be able to provide alternative financing that will allow you to make smaller monthly payments. In today's economy, the last thing any lender wants is to have yet another foreclosure on its books.

You must act quickly. You have a problem and cannot bury your head in the sand, hoping no one will discover the false information. Disclosure will go a long way toward resolving your problems and relieving your stress.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site, http://www.kmklawyers.com.