HM Revenue & Customs (HMRC), the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) have worked together to launch the Mortgage Verification Scheme.
The scheme was announced in the March 2010 budget and has been refined during a subsequent pilot period. Use of the scheme will be limited to cases where lenders reasonably suspect, following their own rigorous checks, that mortgage fraud may be taking place.
Mortgage lenders will send relevant details of mortgage applications where they have inadequate evidence of declared income and suspect fraud using a secure electronic platform to HMRC, which will check income details declared to lenders against information provided in income tax and employment returns. HMRC will then advise lenders whether or not the details correspond, which will inform lending decisions.
As well as aiding mortgage fraud prevention, the scheme seeks to help HMRC to risk assess whether the information it has been given on applicants’ tax affairs is correct. In return, lenders gain access to a source of data that helps them to lend responsibly and manage risk. Financial institutions use a variety of sources to help them assess fraud risk, however, and will not rely solely on responses provided by HMRC to reach a decision where the lender suspects fraud.
HMRC has set up a specialised unit to deal with the requests. Any mortgage lender who wishes to use the scheme may do so. Other than a fee of £14 plus VAT per case to cover HMRC’s costs, lenders face no additional fees to participate. It is not anticipated that the scheme will have any significant impact on the time taken to reach a lending decision.
The National Fraud Authority estimates the cost of mortgage fraud at £1 billion last year, so measures to tackle it are important.
Paul Smee, CML director general, said: “Lenders have found during the pilot that the scheme has been very useful in helping them to lend responsibly. It has helped them to avoid lending in some cases where there is a risk of fraud
