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BUDGET 2010: HMRC to consult on income verification service for lenders

HMRC is to open discussions with mortgage lenders on the formal introduction of an income verification service.

According to today’s Budget, the service would provide lenders with greater certainty about the consumers they lend to.

As part of its Mortgage Market Review, the FSA has proposed placing full responsibility for affordability on lenders. It is also proposing making mortgage brokers personally accountable to the FSA and a ban on self-certification loans.

MAC Consulting chief executive Mark Chilton says: “The idea of HMRC being used for income verification sounds worthy, but is totally impractical.

“The database on tax returns is a minimum of nine months out of date. A recently redundant loan applicant could get a positive verification and applying for the income reference will just take too long.”



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There are 24 comments at the moment, we would love to hear your opinion too.

  1. Oh! Did the credit crunch start over here then?

    Blimey, I must have been thinking everything started in America

  2. I don’t agree with Mark, sorry. There’s no reason why an HMRC income database cannot be accessible directly by lenders. Income data 9 months or so “out of date” is still valuable support in a lending decision, which will be further reinforced by more recent bank statements.

    80% of the population don’t complete tax returns – their employers’ returns of income (sent in far earlier than the following January) would be available.

    Taking it further, though, NI is paid monthly to HMRC on the basis of each month’s income for employees, so this data would provide ongoing confirmation of recent income without the need to wait for tax returns.

  3. … not to mention that HMRC centres are manned by over-worked staff, with (generally) little concept of having to respond to letters/faxes/emails/etc.

    Good luck!!

    Oh, but its a great way of potentially swelling the public sector ranks (again) – keeping everyone dependent/employed by the State.

    Same OLD Labour!!

  4. HMRC will not have up to date figures and that will only lead to more difficulties and potential errors
    Commercial sense is no longer an option
    Lenders will happily lend to an employee with a 10% deposit who can provide the last 3 months payslips,than a self emoloyed sole trader who requries a 50% LTV MORTGAGE but on paper cannot provide sufficient income formally. Whilst prudent measures shoud be taken to reach a lending decision- there is no commercial sense lending as computerised credit scores cant think for themselves!
    RIP mortgages for the self employed

  5. Utterly ridiculous, there is plenty readily available documentation to prove income (payslips, clients bank statements contracts of employment etc etc). Also I agree with Mark Chilterm HMRC are in a right mess so how efficient are they going to be with up to date income figures?

    I agree that the brokers should have an element of accountability but do we not have that already its called “Fraud” Would love to see the FSA practising what they preach when its comes to accountability.

    Sounds like time for another colossal waste of money that will achieve very little.

  6. Lets’s hope that they can manage to deal with it quicker than the applications for student loans, CRB record checks for teachers, school allocation places………… or any of the other things that government turns its hands to that ultimately ends in a disaster. The whole system will grind to a shuddering halt.

  7. This government is determined to introduce red tape, bureaucracy cost and delay at every turn.

    If people want to self certify their income even to lie about it and are then unable to repay their loans they lose their homes. It is a commerical risk for lenders and a stupid risk for a borrower.

    Let people have the freedom to make up their own minds and then face the consequences of their actions. We do not want or need a nanny state regulating every area of our lives…

  8. Brokers are always rather critical when it comes to lenders checking income etc. stating it will take too long or be unmanageable/impracticable.

    I have to tell you, if I were lending someone £100,000 odd of my money, I would want to check the borrowers position rigorously including 12 months bank statements to check their spending habits. When was the last time a broker lent their own money – I think they would be a little more cautious if they did!

  9. Well obviously you would use in conjunction with the routine and traditional call to the applicant’s employer! Think for self-cert and self-employed it makes sense. Also means self-employed cannot have their cake and eat it by fiddling books, tax dodging by declaring a lot less but still able to get a huge mortgage. Think the independent mortgage expert is just worried that without applicants being able to lie about their income he will get less commission as less business coming in.

  10. Regardless as to whether such nonsence is viable,
    there is the question of Data Protection, which ofcourse can be circumvented by forced agreement, (i.e. agree or no mortgage) which in turn leads to Unfair Terms of Contract under the Enterprise Act.

    Them there are the implication for joint applications, small business (if a mortgage is beyond reach to small business operatives, then their number will diminish) Employment and many other aspects will suffer.

    The Government should leave income determination to the mortgage industry and stop interferring. The old system worked and did not need fixing, Is the new system going to produce better results (however measured) than the old, I doubt it.

    Will HMRC involvement result in an increase in the number of civil servants and their benefits including pensions and who will pay the price?

  11. The whole mortgage market is now firmly hogtied by regulation and it is a major factor in holding back house prices and the recovery.

    I would like to think that the FSAs primary driver in this piece of legislation was consumer protection, however, I suspect that self protection is at its heart after recent parliamentiary critisism.

    At what point does regulation become strangulation?

  12. what planet are these people on we want mortgage offers out asap now we wait for the revenue to confirm income on accounts that may be a year out of date it will be an absolute nightmare.

  13. Does the Government or the FSA have a responsibility to ensure/provide certainty in respect of mortgage applicants income declaration. I personally they do not and therefore consider such activity as empire building.

    Further what if somebody is found to have overstated their income, will they be charged with fraud, be fined, go to prison, named and shamed or simply loss their jobs.

    Will any defence be allowed, such as estimates of advanced income in the next six or twelve months,
    due to promotion, transfer to a higher paid income source. Expanding family needing more space, wife intends to return to work.

    While those who throw the stones, breach their own codes of conduct, such as Mps expenses and declared abuse of FSA employment contracts by executives within the FSA. All of which have been the subject of recent media reports.

  14. Utterly ridiculous!

  15. Stephen Schofield 24th March 2010 at 4:35 pm

    Am I so old fashioned that Pay Slips / P60’s or copy accounts / accountants certificates already in the hands of prospective borrowers will not suffice.
    Why are we continally trying to re-invent the wheel?
    More complex clients obvioulsy need a more flexible approach but this should suffice for the majority surely.

  16. Public sector involvement in private sector enterprise is just the most horrendous marriage of a most wholly unsuitable couple.
    There are different mind sets at work. How many private business owners have ever said of any central or local governmental entity “If I ran my business like they do their’s i’d be down the tubes in 6 months”?
    Risible idea altogether.

  17. I suspect a few clients applied for self certification mortages but with banks and some mortgage advisers making life easier for themselves by going self certification I suggest it is at least partially a problem of the industry making, and lenders encouraged it.

    Put the fees up on self certification and pay the extra to who ever does the affordability test. It isnt hard to prove exceptional expenditure or increased business expence. I say make both lender and adviser accountable for affordability. If there is doubt the adviser should decline the business. Its all to do with greed

  18. What I can’t understand is is this whole scenario meant to (a) Get more tax in for the revenue by highlighting inflated incomes from the self certs(b.) get more revenue for the FSA by fines to the industry for so called fraud or( c.) more work and more jobs for the boys!!!
    If you analise the CMLs expected arrears and repossesions figures issued at the beginning of 2009 and the actual figures there is quite a discprepency downwards which strikes me that in a time of turmoil for the self employed they have faired as good and perhaps even better than the employed as far as mortgage arrears and repos are concerned.
    It really does beg the question as to why is the FSA gunning for the self certs and brokers without hard evidence to warrent this investigation?

  19. More government. More intrusion as if HMRC haven’t got enough to do already. Big Brother by any standards which of course will cost more. Just the sort of thing to help a recovery!

  20. I do not agree the old system worked, if it did there would not be so much mortgage fraud both discovered and likely still uncovered. It would stop people fiddling their books and paying less tax. As a mortgage broker I know some self employed people are irritated at checks currently in place now which had not been 18 months ago. The role of a mortgage brokers is changing and change is often uncomfortable. I think we need to adapt and figure out ways of bringing greater value to the service we offer. The government and association bodies seem to want state run finance without the obligation of state accountability, hence support banks and scupper brokers whenever possible. This venture seems another step towards this. I would like to know if there is a future in the role I have trained for or if ultimately I’m flogging a dead horse.

  21. Great idea, and it should be extended to include any applications for any type of credit, by anyone – and,if not, why not?

  22. End of the road 24th March 2010 at 11:28 pm

    Would it not be far easier for the FSA to sell franchises. Like Easyjet, you could have FSA (mortgages – North of England) Ltd, (South of England) Ltd, FSA bank loans LTD, If busienss got bad, you could then use the FSA logo for things like BBQ’s and second hand cars.

    Soon the FSA could sweep the square mile – FSA (checking how much binus you get) ltd, making all employers accountable, personally, for how much salary they pay there staff. Hey this is a good idea……G-D save the FSA!

  23. Once again it appears the government/regulator is attempting to use the current market uncertainty to attempt to impose stringent criteria on the commercial mechanisims that run our mortgage markets. Ultimatley it should be left to the lenders to decide who or what constitutes good levels of lending risk by using what ever they feel as practical proof, whether it be 1 x proof of income or 10 x proof of income, the choice as they say should be theirs. Lastly, it was not the residential lending policies in this country that created the global financial problem so why the concerns, the lenders themselves have ratcheted up their lending criteria with out government intervention so if it ain’t broke why fix it!!

  24. The housing market will never recover, the economy will slow down. These stringent conditions will ensure the slow down continues!
    Soon there will be NO brokers left to regulate.
    We need a balanced approach to regulations!

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