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IM On The Money - Issue Five

Mortgage Verification Scheme

HM Revenue & Customs, the Council of Mortgage Lenders and the Building Societies Association have teamed up to create a new tool to combat mortgage application fraud. The Mortgage Verification Scheme is officially launched on, 1 September 2011, following a successful pilot scheme.


The National Fraud Authority estimates the cost of mortgage fraud at £1 billion last year therefore the importance of measures designed to tackle this cannot be overstated. The March 2010 Budget announced that HM Revenue and Customs (HMRC) would open discussions with mortgage lenders to provide them with greater certainty about those to whom they lend. HMRC, the Council of Mortgage Lenders and the Building Societies Association have worked together on the development of the Mortgage Verification Scheme. Its use will be limited to cases where lenders reasonably suspect, following their own rigorous checks, that mortgage fraud may be taking place.

How it works

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 assist in lending decisions. Access to this information allows lenders to lend responsibly and manage risk.

HMRC has set up a specialist unit to deal with the requests and any mortgage lender who wishes to use the scheme may do so. HMRC charge a fee of £14 plus VAT to cover their costs however other that there are no additional costs to lenders. It is also 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 have otherwise have felt compelled to refuse.”


In a climate where lenders are under so much scrutiny there is more necessity than ever for them to lend responsibly and be risk averse. The Mortgage Verification Scheme is a relatively inexpensive method to provide further safeguards against mortgage fraud.

Our Professional Negligence Team have identified certain markers which would suggest an element of fraud in a number of shortfall sale cases. It would therefore seem appropriate that lenders use all tools at their disposal to identify fraud before any decision to lend is made.

Dalene Whelan, Trainee Solicitor, IM Insurance Lending & Recoveries Team

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