From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

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1 September sees launch of Mortgage Verification Scheme to combat fraud

Published: 30 August 2011

Following a successful pilot, 1 September sees the formal launch of an important new scheme to combat mortgage application fraud.

HM Revenue & Customs, the Council of Mortgage Lenders and the Building Societies Association have worked together on the development of the Mortgage Verification Scheme and see it as an important additional tool to help beat fraud. The National Fraud Authority estimates the cost of mortgage fraud at £1 billion last year, so measures to tackle it are important.

The scheme was announced in the March 2010 budget and has been refined during the pilot period since. 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. 

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. 

As well as aiding mortgage fraud prevention, the scheme will help HMRC to risk assess whether the information it has been given on applicants’ tax affairs is correct. In return, lenders gain access to a source of data that helps them to lend responsibly and manage risk. Financial institutions use a variety of sources to help them assess fraud risk, however, and will not rely solely on responses provided by HMRC to reach a decision where the lender suspects fraud.

HMRC has set up a specialised unit to deal with the requests. Any mortgage lender who wishes to use the scheme may do so. 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.

CML director general Paul Smee comments:

"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."

BSA director general Adrian Coles says:

"This scheme is an excellent example of 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. Mortgage fraud is a cost to the industry, and ultimately the consumer, so this scheme benefits both lenders and consumers alike."

Colin Barclay, Assistant Director, HMRC Risk and Intelligence Service, says:

"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."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 94% of all residential mortgage lending in the UK. There are 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.

2. The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 48 UK building societies. Mutual lenders and deposit takers have total assets of over £365 billion and, together with their subsidiaries, hold residential mortgages of almost £235 billion, 19% of the total outstanding in the UK. They hold more than £245 billion of retail deposits, accounting for 22% of all such deposits in the UK. Mutual deposit takers account for about 35% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.

Contact us

CML: Sue Anderson/Jayne Walters

020 7438 8924/8922

BSA: Hilary McVitty/Rachel Wylie

020 7520 5926/5905

HMRC: Sara Pont

020 7147 0394