HM Revenue and Customs has got together with mortgage lenders to help eradicate mortgage fraud.
When you read about financial fraud you expect to hear about shady meetings, off-shore bank accounts and bribes. But within the Â£1 billion estimated annual amount of mortgage fraud lays the more mundane rule breaking of lying about one’s income. But HMRC is about to close that avenue down.
The recent housing bubble was not just a result of lenders giving out loans too readily. It was also contributed to by the many people who, in the aching desire for that dream home, lied about their incomes to the lenders.
And with the more lax approach to checks at the time many people got away with it and received a loan for which they did not qualify. In some cases this was encouraged by the banks using ‘self-certification’ mortgages, where no checks are done, or putting the application through a ‘fast track’ procedure where only a percentage were checked based on credit scoring and profiling.
Some may say that this is not really a crime. But when inflating your wages in this way you are misrepresenting your risk profile to the bank.
Traditionally when checking on income the applicant will produce income and expenditure proof in the form of payslips and bank statements as well as the lender contacting the employer directly. But in more complex cases of those with more than one job or where they are self employed this may not always give the full picture.
So HMRC, the Council of Mortgage Lenders and the Building Societies Association developed a voluntary ‘mortgage verification scheme’ with two unknown lenders, which has now been rolled out.
Under this scheme lenders can pass on applicants’ details to HMRC who will check the income declared against tax records.
So now overstating your wages can not only get the application turned down but also attract the attention of a special tax investigation. But possibly worse still is that your credit report may then be annotated with a CIFAS category 4 marker for 12 months citing application fraud. CIFAS glossary – ‘Mortgage Fraud Any attempt by an applicant to obtain a mortgage by deliberately providing false details in respect of income, occupancy, or any false detail provided by Introducers, Valuers and/or Solicitors on behalf of the applicant.’ Although this should not affect your scores a quick Google of the problems people have with it is worth noting.
CIFAS, originally ‘Credit Industry Fraud Avoidance Service’, was founded in 1988 to help prevent fraud.