Last week saw the launch of the Mortgage Verification Scheme which will allow mortgage lenders to check the income of applicants with HMRC.
Self certification mortgages, or “liar loans” as some sections of the press liked to call them, became popular during the last housing boon and were believed to be widely abused by people wanting to borrow larger amounts of money than they could by using a traditional mortgage.
The new scheme is aimed at ensuring people accurately declare their income on their mortgage application.
Income checks
The Mortgage Verification Scheme is being set up by the Council of Mortgage Lenders, the Building Societies Association, and HMRC. It will allow lenders to pass on an applicant’s income details to HMRC for additional checking, if they don’t match records held with HMRC it could lead to an application being refused and in some cases a tax investigation.
Reducing fraud
The scheme is aimed at reducing mortgage fraud, particularly with regard to self certification mortgages which simply require an individual to state their income on the mortgage application but provide no proof.
A Council of Mortgage Lenders spokesperson said that the scheme will “help HMRC to risk assess whether the information it has been given on applicants’ tax affairs is correct”.
She continued to say that the pilot scheme had already found potentially fraudulent mortgage applications but that the scheme “works both ways” adding “there are people whose mortgages have been approved because of the checks – they can make lenders more confident.”
Director General of the Council of Mortgage Lenders, Paul Smee, 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, 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.”
Colin Barclay, Assistant Director, HMRC Risk and Intelligence Service, said: “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.”
The voluntary scheme is limited to cases where the lender reasonably suspects a case of mortgage fraud might be taking place, however some experts believe that its use could become widespread, particularly because HMRC are charging just £14 + VAT to carry out a check.
