Quick answer
Treating wrongdoing as a joke is itself the diagnosis. The verse contrasts that with a community where things go well between people.
Read both lines
The NKJV footnotes "sin" as literally guilt, which sharpens it: what the fool mocks is the whole idea of being answerable. That is a posture rather than an act, and it explains a good deal of behavior that otherwise looks merely reckless. The second line's "favor" is a relational word about goodwill between people, so the contrast is social. Where nobody takes responsibility seriously, life together corrodes; where people do, there is something worth calling favor circulating among them.
Related: Proverbs 10:23 · Proverbs 3:34 · Proverbs 14:34
New King James Version®, Copyright © 1982, Thomas Nelson. All rights reserved. Full copyright information. Scripture provided by API.Bible.
Go Deeper
If this verse has been used to put weight on you that it was never carrying, ask about it directly.