The Mortgage Verification Scheme has been developed together by the CML, BSA and HMRC following its announcement in March 2010 and subsequent pilot.
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, given that 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 not believed that the verification scheme will 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.”
Adrian Coles, director general of the BSA, said: “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, 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.”
