HMRC joins forces with lenders to tackle fraud
2 September 2011
The new Mortgage Verification Scheme, initiated by HMRC and the Council of Mortgage Lenders (CML) and the Building Societies Association, was launched at the beginning of this month, in a bid to prevent the increasing problem of mortgage fraud. Typically, someone committing fraud will be untruthful about their financial position or income in order to obtain a mortgage, or borrow an amount higher than they might have otherwise been capable of.
‘First-party’ fraudsters, where an individual misrepresents their own financial circumstances, is common – a report by Experian shows mortgage fraud to be up by 13% in 2010 on the previous year. First-party fraud made up 97% of this. Also surprising in the Experian report is the increase in young professionals who are prepared to be economical (or indeed, over-generous) with the truth in order to obtain a mortgage or credit.
According to the CML, under the scheme mortgage lenders will, after their own independent checks, send relevant details of mortgage applications where they reason to suspect fraud using a secure electronic connection 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.
The move will help to combat the UK’s £1 billion mortgage fraud problem, but will no doubt prove unpopular with some considering that HMRC are also going to use the system as an opportunity to check applicants tax affairs. So submitting a suspect application could not only result in a failed application and possible criminal proceedings, but land applicants in hot water with HMRC too if tax affairs are not in order.
The scheme officially launched on the 1st of September following a successful pilot period. It is thought the procedures will not impact on the time taken to provide an applicant with a decision.
Colin Barclay, Assistant Director, HMRC Risk and Intelligence Service, says: "HMRC are determined to tackle fraud wherever we can. The Mortgage Verification Scheme is an unprecedented opportunity for HMRC and lenders to work together to combat fraud in the mortgage industry."