Mortgage Verification Scheme To Thwart Application Fraud

A new mortgage verification scheme will be launched on 1st September to help thwart mortgage application fraud, which was estimated at £1 billion last year.

Following a government announcement in the March 2010 budget to clamp down on mortgage application fraud, the HM Revenue & Customs, the Council of Mortgage Lenders and the Building Societies Association have combined forces to create a new mortgage verification scheme.

A successful pilot scheme has been run since the budget announcement and the scheme will now be launched nationally on 1st September.

The scheme will only be invoked when a mortgage lender suspects that application fraud is occurring, most of which is derived from overstating incomes or misrepresenting personal circumstances.

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.

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.

“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.”, Paul Smee, the CML director general Paul Smee commented.

MoneyHighStreet.com Comments: It is amazing how the mortgage market has been subjected to so much fraud in the past. At MoneyHighStreet we often receive press announcements about directors of mortgage brokers who have been found guilty of various frauds.

And, as this news items shows, some mortgage applicants, too, have also committed fraud by over stating their incomes or lying about their employment or circumstances to succeed with their mortgage application.

This verification process sounds like an excellent idea as it should boost that vital commodity with mortgage lenders – confidence. Let’s hope that this results in making things slightly more easy for bona fide applicants to secure a mortgage.

Maybe easing mortgage lending criteria slightly may help prevent the housing market problems that the National Housing Federation is predicting.