Fraud measures could damage housing market
Saturday 03 September 2011
A scheme tackling mortgage fraud – which cost the industry about £1bn last year – may slow applications in an already stagnant market, mortgage brokers have warned.
Lenders who "reasonably suspect" that mortgage fraud may be taking place will send details of the application to HM Revenue & Customs (HMRC), who will check income details against information provided in income tax and employment returns. HMRC will then advise lenders whether or not the details correspond.
According to CIFAS, the UK fraud prevention service, two prominent types of fraudulent mortgage activity came to the surface in the first half of this year. The concealment of adverse credit history, which could include not declaring debts or previous addresses with county court judgments associated with them, accounts for around 24 per cent of individual mortgage fraud recorded. However, altering proof of income, such as payslips or P60s, also accounts for around 24 per cent of reported fraud, up from 14 per cent in the last six months of 2010.
"People know enough about mortgage lending to realise that they need a certain income to borrow a certain amount," says CIFAS spokesman Richard Hurley.
"They are taking action they otherwise wouldn't have considered, but they aren't considering the ramifications. People don't see it as fraud, as akin to MPs manipulating their expenses. A mortgage application is a legal process concerning a large amount of money and a fraudulent application could certainly lead to a criminal record or a civil pursuit."
The Mortgage Verification Scheme comes at a time of acute stagnation in the mortgage market, and brokers worry that further bureaucracy could mean applications are slower to process.
"The fraud scheme is being introduced in response to some of the excesses in the market at the height of the lending boom," says Melanie Bien, director of mortgage broker Private Finance. "Mortgage fraud has been less of an issue since the downturn, as lenders have displayed more caution and the volume of lending has fallen.
"Lenders may welcome the opportunity to double-check an applicant's financial position but it could be an issue if this significantly slows down the application while the lender awaits a response."
A mortgage application currently takes around three to four weeks to process, including credit checks, valuation and references. Contract negotiation, surveys, exchange and the eventual fund transfer regularly makes the process 10 to 12 weeks long.
And that's when everything goes smoothly. If the new scheme becomes used widely then experts warn it will be vital that HMRC delivers information in good time to make sure that applications aren't delayed.
"The verification service will only be as good as the quality of the data and the matching process being up to scratch," warns David Hollingworth, of mortgage broker London & Country. "It could pose problems for borrowers if their data is not matched correctly.
"But if this service can be shown to be robust it could have some benefits and reduce the amount of documentation currently required."
Childcare costs squeeze households
Young families are giving up on financial security as the spiralling cost of childcare forces more parents to stop work to look after their children.
Despite a staggering 95 per cent of UK families worrying that they aren't protected against loss of income, many families are giving up the two-parent income as the cost of childcare reaches an average of £729 a month for a two-year-old, research from Aviva has found.
A typical working woman with two children could be out of pocket by £98 for part-time and gain just £120 a month in full-time work once childcare and work expenses are taken into account. The loss has prompted 32,000 more women to stay at home to care for children since the third quarter of 2010.
But the trend does nothing to help families who have little to fall back on if the main breadwinner's salary is lost. Just 10 per cent of families have an income protection insurance, and typical family savings are just £982, less than half the average monthly income, the insurer warns.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
- 1 Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
- 2 Christians: The world's most persecuted people
- 3 The secret report that helps Israel hide facts
- 4 Danish TV reporter is all business up top, all party down below
- 5 Ross Burden dead: MasterChef and Ready Steady Cook star dies at age 45
The secret report that helps Israel hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
iJobs Money & Business
£30000 - £34000 Per Annum 25 days holiday, Private healthcare: Clearwater Peop...
£400 - £450 per day: Orgtel: Business Analyst - Credit Risk - Banking - London...
£500 - £600 per day + competitive: Orgtel: My client, a leading bank, is curre...
£20 - £22 per hour + competitive: Orgtel: Senior Fund Administrator, Top Four ...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000