In theory, the new mortgage verification scheme launching in September should not make any difference to applicants, unless they have put false information on their application. Except in rare cases, this should not adversely affect the Conveyancing process.
The scheme has been set up in co-operation between HM Revenue and Customs, the Council of Mortgage Lenders, and the Building Societies Association. Its use will be limited to cases where, following their own checks, lenders reasonably suspect that fraud may be taking place.
Although lenders have always carried out their own checks on applications, and Conveyancing Solicitors have been required to be on the alert for possible irregularities, this has not stopped many such frauds being perpetrated. This disrupts the Conveyancing process and, worse, often results in unfortunate home-movers losing £100, 000s.
How will the mortgage verification scheme operate?
Where lenders have inadequate evidence of declared income or suspect employment information, they will be able to send relevant details to HMRC using a secure electronic platform.
Details declared to lenders will then be checked against information provided in income tax and employment returns, and lenders will be informed whether or not the details correspond.
While some may see this as yet another manifestation of the ‘Big Brother’ state, the cost of mortgage fraud was estimated to be £1 billion last year. As the cost of this ultimately falls upon other borrowers and bank customers, the scheme should be welcomed by the majority of borrowers.
It is unlikely to have any affect on the Conveyancing process for most buyers and sellers, as the lenders would not issue a formal mortgage offer until they are satisfied with the application.
Buyers may not have received this when they first instruct Conveyancing Solicitors, and hence many transactions are well advanced before the formal mortgage offer is in hand. Should no offer be forthcoming, it would not be possible to complete – but, realistically, in fraudulent cases the innocent party would not wish to proceed anyway.
Given that this will affect only a small percentage of property transactions, this new service will be both a benefit for innocent parties, and a major blow for property fraudsters.