HMRC has teamed up with mortgage lenders to clamp down on home-loan fraudsters
Lying about your salary in order to get a bigger mortgage has just become a whole lot more risky.
This week saw the launch of a scheme to combat home-loan fraud which will see the taxman getting involved in cases where the bank or building society thinks there is something fishy about the income someone has declared on their application form.
Anyone tempted to inflate their salary – or even submit fake payslips or bank statements – when applying should be aware that, if they are rumbled, they could find themselves being investigated and possibly prosecuted for fraud.
Probably the “least worst” outcome is that their application will be refused and their homebuying plans thrown into chaos.
Following a successful pilot, which involved two unnamed lenders, the voluntary “mortgage verification scheme” was officially launched on Thursday. It has been developed by HM Revenue & Customs, the Council of Mortgage Lenders (CML) and the Building Societies Association, and is being seen as an important additional tool in the battle to combat what is a £1bn-a-year problem.
The system allows lenders to pass on applicants’ details to the Revenue. The taxman will then check that what the individual has declared about their income, corresponds to the tax and employment information held on its databases. If it doesn’t, the borrower could be investigated by the taxman.
“Use of the scheme will be limited to cases where lenders reasonably suspect, following their own rigorous checks, that mortgage fraud may be taking place,” says the CML.
Contrary to what some may think, fibbing about your income (or worse) isn’t a problem confined to the self- employed, freelances and others whose earnings are complicated – people on PAYE have been known to commit mortgage fraud, too. As part of the scheme, HM Revenue & Customs has set up a specialised unit to deal with the cases, which will cost lenders £14 a time.
“Lenders have found that, during the pilot, the scheme has been very useful in helping them lend responsibly,” says the CML.
“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, that they might otherwise have felt compelled to refuse.”
John Cassey, at risk consultants Protiviti, says that, in some of the large-scale mortgage fraud cases it had investigated, there had been no proper verification of earnings. Some of the worst cases involved buy-to-let mortgages where “self-certification” of income was accepted without scrutiny.
“In one particular case we investigated, the applicant declared herself to be an au pair from eastern Europe earning in excess of £80,000 a year, and she managed to obtain a mortgage for over £250,000.
“In a couple of cases, applications had been made using stolen or false identities, so an independent verification through this scheme may also help identify this.”
