The National Fraud Authority estimates the cost of mortgage fraud at £1 billion last year, so measures to tackle it are important.
The scheme was announced in the March 2010 budget and has been refined during the pilot period since. 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 will 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.
CML director general Paul Smee comments:
"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, at the same time as giving them confidence about the borrower’s credentials in some cases that they might otherwise have felt compelled to refuse."
BSA director general Adrian Coles says:
"This scheme is an excellent example of HMRC working proactively with business to provide a valuable service which could significantly decrease mortgage fraud and give an additional check to bolster responsible lending. Mortgage fraud is a cost to the industry, and ultimately the consumer, so this scheme benefits both lenders and consumers alike."
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."
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