My accountant found a discrepancy on my tax returns for last year. My income had been overstated by approximately 20 percent. He is filing an amended return with the IRS. Meanwhile I was approved for a mortgage, in a large part, based on income on my last tax return. I have already closed and am living in my new house. What will happen if the bank finds out that I overstated my income by 20 percent? What is my legal obligation? Do I need to advise the bank? Can they revoke (call) the mortgage and foreclose even though I am making payments on time?
1 Answer from Attorneys
Look at your Note and particularly your Mortgage to see if there are provisions that require reporting.
Assuming there are none, there may still be some vague duty to report- sounding in the laws of fiduciary duty. I imagine there are Federal Statutes on point as well.
This really is something to discuss with your accountant. He or she can write a letter to the Bank explaining the innocent error and why it occurred- if indeed that is the action that he believes is best suited for your circumstances.
He will want to know, or already knows, why the mistake was made.
I can foresee a resolution where you and the Bank enter into a letter-agreement that the issue will not be raised unless you default on your loan obligations strictly because of your lower than than reported income and for no other reason. Of course this is a fall back position. If you report you will want to first determine if the Bank will just forgive and forget the error.
This is not a legal opinion and may not be relied upon as such. For an opinion you will need to formally engage Florida counsel and confer one on one.