How far would people go to get better terms on their mortgage?

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Would you feign financial trouble to qualify for a loan-modification plan?

As the government and private lenders face more pressure to aid struggling borrowers in a worsening economy, they’ll inevitably have to deal with the "moral hazard" issue: They may be encouraging applications for help from people who could otherwise scrape by without assistance.

On Tuesday the Treasury announced a new loan-modification effort for mortgages held by Fannie Mae and Freddie Mac, which the government took over in September.

My colleague Maura Reynolds describes the program in this story. Basically, the plan would reduce a homeowner’s payment to no more than 38% of monthly gross income, by cutting the interest rate, deferring payments or extending the loan term
http://latimesblogs.latimes.com/money_co/2008/11/how-far-would-p.html

[24KT]

In any society, no matter the issue, there will always be those who will fudge numbers to gain a perceived advantage for themselves. Whether there are penalties for early pre-payment would lower that number significantly