Money News

New scheme to foil mortgage fraudsters launched

By Martin Fagan - news@consumerchoices.co.uk

Lenders suspicious of mortgage applicants’ salary claims can now cross-reference details with taxman.

In an effort to combat the £1billion of mortgage fraud committed each year by applicants who falsify salary details to borrow more than they should, a new scheme has been launched which enables suspicious lenders to cross-reference applicants’ salary details with HMRC.

Launched today, the Mortgage Verification Scheme (MVS) will enable lenders who are suspicious of the high level of an applicant’s declared income to check the details against information provided in income tax and employment returns held by HM Revenue & Customs (HMRC).

The scheme is designed to foil so-called “liar loans” where applicants overstate their income using forged payslips or falsified accounts in order to borrow more money, or where fraudsters deliberately target mortgage lenders to borrow against bogus property and then make off with the cash.

If after conducting its own credit checks a lender suspects the applicant’s declared income is over-inflated and suspects fraudulent activity, the lender can check the applicant’s details with HMRC. HMRC will check the applicant’s tax details and then advise lenders whether or not the details correspond.

"Mortgage fraud is a cost to the industry and, ultimately, the consumer, so this scheme benefits both lenders and consumers alike,” said Adrian Coles, director-general of the Building Societies Association.

"This scheme will provide a valuable service which could significantly decrease mortgage fraud and bolster responsible lending.”

Commenting on the scheme’s launch, Colin Barclay, assistant director of HMRC’s 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."

As well as helping to prevent mortgage fraud, the scheme will help HMRC to assess whether the information it has been given by the lender on an applicant’s income is correct against the income they have declared on their mortgage application.

If HMRC suspects any applicant has deliberately not declared income or looks to have falsified their tax return in order to avoid paying tax, it could launch its own investigation into the applicant’s tax affairs.

The National Fraud Authority estimates that, in 2010, mortgage fraud cost UK lenders a collective £1billion.