Mortgage fraudsters targeted by joint lender-govt scheme

A government-backed scheme to tackle mortgage application fraud will officially launch on 1 September, enabling lenders to check details of borrowers they suspect of fraud through HM Revenue & Customs.

The Mortgage Verification Scheme has been developed by the CML, BSA and HMRC.

It aims to reduce the cost of mortgage fraud, estimated by the National Fraud Authority at £1bn in 2010.

Use of the scheme will be limited to cases where lenders reasonably suspect that mortgage fraud is being committed, once they have conducted their own checks.

Lenders that have inadequate evidence of declared income and suspect fraud will be able to send details to HMRC to check the income details against information provided in income tax and employment returns. HMRC will then tell lenders whether the details correspond.

However, lenders' decisions will not be solely based on HMRC's responses, as they take information from a variety of sources.

Alongside aiding mortgage fraud prevention, the scheme is also intended to help HMRC to risk assess whether the information it has received on applicants' tax affairs is correct.

A specialised unit within HMRC has been set up to deal with lenders' requests and lenders will pay a fee of £14 plus VAT per case to cover costs.

It is believed the verification scheme will not have any significant impact on the time taken to reach a lending decision.

CML director general 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."