It's definitely a slam dunk for mortgage fraud, but I'm not sure about the tax evasion at this point since the W-2 reflected a lower income as well. Did the applicant provide bank statements or other financials as part of the process? I'd review those, along with any large deposit explanations, to see if he's actually getting the "income" or just lying about it.
In other words, is he fudging the numbers (outright lying) or trying to have his cake and eat it too (two books: one for tax man, other for you)? I'd bet the latter, but would look to evidence it since you have his loan app.
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CFE, CAMS