Mortgage Verification Scheme to lower costs for buy-to-let borrowers?
Investors in buy-to-let properties could benefit from a new scheme designed to prevent mortgage fraud.
The Mortgage Verification Scheme is the product of cooperation between HM Revenue & Customs, the Council of Mortgage Lenders and the Building Societies Association (BSA) and is designed to provide additional scrutiny to suspicious mortgage applications.
In cases where mortgage lenders have inadequate evidence of declared income and suspect an application may be fraudulent, they can send relevant details using a secure electronic platform to HMRC.
HMRC will then check the declared income details against information provided in income tax and employment returns and advise lenders whether or not they correspond, which will inform lending decisions.
It is hope that the scheme can help eradicate part of the £1 billion annual cost of mortgage fraud, resulting in savings which can then be passed on to borrowers.
"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," said BSA director general Adrian Coles.
"Mortgage fraud is a cost to the industry, and ultimately the consumer, so this scheme benefits both lenders and consumers alike."
Speaking to Mortgage Finance Gazette, John Cassey, head of UK anti-fraud and litigation services for auditor Protiviti UK, suggested that buy-to-let borrowers may have the most to gain from a crackdown on mortgage fraud.
"In some of the large scale mortgage fraud cases investigated by Protiviti, we found that there had been no proper verification of income, particularly on those involved in buy-to-let schemes where self-certifications of income were accepted without proper scrutiny," he said.
It follows a recent report from the Bank of England which found that demand for nuy-to-let mortgages grew rapidly in the second quarter of 2011.
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