Yesterday saw the launch of the new Mortgage Verification Scheme – a new venture set up by the Council of Mortgage Lenders, the Building Societies Association and HM Revenue & Customs to help combat mortgage fraud.
Under the scheme, mortgage lenders can choose to pass on an applicant’s details to HM Revenue & Customs (HMRC) for further checking if they have insufficient evidence of the income being declared by the borrower and suspect fraud.
HMRC will then check their records and advise the lender whether or not the details correspond – this will help lenders decide where to grant the mortgage or not and, in the event of any discrepancies, could also lead to the borrower being investigated by the Revenue.
The CML has said that, “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.” Also, each referral to HMRC will cost the lender £14 plus VAT which should deter it from being over used.
Before the credit crunch, mortgage fraud would often involve people attempting to borrow more than they could typically afford by overstating their income when applying for a mortgage. This would often be done by using self-certification mortgages where the borrower would declare that the income they stated was correct and the lender would ask for no further evidence.
More recently, the end of the house price boom, the collapse of the “self-cert” market and much stricter lending rules, have all helped make this kind of fraud much less prevalent – however, mortgage lenders and the Government are still keen to show that they are doing what they can to stamp it out.
With this new scheme, anyone who tries to commit fraud and declare an over-inflated income on their mortgage application could face much more serious consequences than simply having their application declined.