by Mark Johnston
The national fraud authority has estimated that the cost of mortgage fraud was around £1 billion last year, effecting both lenders and borrowers alike.
Contrary to what some people may think, fibbing about income is not a problem confined to the self employed or freelancers, people on PAYE have been known to commit mortgage fraud too.
Lying about your salary in order to get a bigger mortgage has just become a whole lot more risky. Anyone tempted to inflate their salary or submit false payslips or bank statements when applying for a mortgage should now be aware that as of the 1st of September 2011 a new scheme to combat mortgage application fraud has been launched. This scheme has already been piloted since March 2010.
HM Revenue and Customs (HMRC), the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) have worked together in the development of the mortgage verification scheme and see it as an important additional tool to help beat fraud amongst other things.
This new scheme allows lenders; when in reviewing mortgage applications suspect ‘foul play’ to electronically send the relevant details to HM Revenue and Customs (HMRC). They can then check income details declared to lenders against information they have which is provided in income tax and employment returns. HM Revenue and Customs (HMRC) can then advise lenders whether or not the details correspond.
John Cassey from risk consultants Protiviti said that” in some of the large scale mortgage fraud cases it had investigated there has been no proper verification of earnings and also in a couple of cases applications have been made using stolen or false identities.” Therefore an independent verification scheme such as this would identify these cases much earlier.
As well as mortgage fraud prevention the scheme will provide lenders access to a source of data that will help them to lend responsibly and manage risk. Thus giving them confidence in some cases about borrower credentials, where as they might have otherwise felt compelled to refuse the application.
Paul Smee, director general of the Council of Mortgage Lenders (CML) stated that “lenders have found during the pilot that the scheme has been very useful in helping them to lend responsibly and it has also helped them to avoid lending in some cases where there is a risk of fraud.”
Adrian Coles the Building Societies Association (BSA) director general said that” mortgage fraud is a cost to the industry as well as homeowners, so this scheme will benefit lenders and borrowers alike.
The HM Revenue and Customs (HMRC) has set up a specialised unit to deal with the requests and any mortgage lenders who wish to use the scheme may do so for a fee of £14 plus VAT per case, this is to cover HM Revenue costs.
Although this scheme is new it is not thought that it will have any significant impact on the time taken to reach a lending decision.
Experts suggest this scheme is an excellent example of HM Revenue and Customs (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.
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