There's a lot of buzz about Short Sale fraud. After searching for what's going on, I couldn't find a good answer. So, what I did was ask the experts. After a few Emails, it boils down to this. If you are not upfront with the banks on how much is made on the sale and you get caught, the federal charges will be, stealing from both the BANK and the seller. Now that's Federal time, not state. The link below is for Fannie Mae, which will help those doing Short Sales.
Short Sale Update