BUDGET 2010: HMRC to introduce income verification for lenders

24 March 2010 | By Natalie Thomas

The government has announced in today’s Budget that discussions are to begin between HMRC and mortgage lenders regarding the formal introduction of an income verification service for mortgage lenders.

The government says the service will provide lenders with greater certainty about those to whom they lend.

Only yesterday Alan Brener, director of regulatory risk strategy at Santander called for lenders to have access to tax returns and data from HM Revenue & Customs in order to verify income.

Speaking at the Marketforce and Institute of Economic Affairs Future of Consumer Finance conference in London Brener said this would be beneficial for both lenders and prospective borrowers, but would have to be conditional on applicants granting their consent to HMRC passing data to lenders when they apply for a mortgage.

He says: “There is a possibility that affordability checks could be made easier both for the consumer and for the industry by having access, with the applicant’s agreement, to verify some of their income through their tax returns.

“It would be great if lenders could verify what customers are putting down as their income against say the HMRC figures.”

As part of the Financial Services Authority’s Mortgage Market Review the regulator wants to see income verification on all mortgages regardless of the type of borrower, the type of lending, or whether the applicant is self-employed.

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Readers' comments (24)

Anonymous | 24 Mar 2010 3:30 pm
whilst those of good repute have nothing to hide is this more a way for the government to check that people are not avoiding paying their tax?
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Anonymous | 24 Mar 2010 3:45 pm
What is really needed is for Underwriters to have the ability to interpret the accounts and balance sheets of the self employed rather than blindly relying on the bottom line "net profit". Without this and given that self certification is a thing of the past, I really fear that many self employed clients will struggle to obtain mortgage funding.
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Anonymous | 24 Mar 2010 3:47 pm
it will make it difficult for those whose income changes depending on whether they are dealing with their mortgage lender or the Revenue
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Anonymous | 24 Mar 2010 3:49 pm
I agree it is just the HMRC checking for more tax without actually having to do the work
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Anonymous | 24 Mar 2010 4:05 pm
I cannot see how this will help. The labour markets have changed significantly over the past decade or so. What is clear that lending criteria/policy has'nt. Lenders agreeing to this is laziness on their part and using this service to shift blame moving forward. What Brener is interested in is identifying a good risk for Santander and who can blame him in his post. However it seems the market may have switched from a very risk market to one that will evolve into a complete adverse proposition. My view would be lenders should profile brokers and look at arrears etc and then agree bespoke terms based on actual risk for what its worth.
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BC | 24 Mar 2010 4:07 pm
I'm all for more stringent verification however as has already been pointed out, underwriters in general seem not to be able to read accounts e.g. would they add back in depreciation? Anyway I have never understood why as a self employed person, my income is less reliable than that of my employees. If things had 'gone down the pan' over the last couple of years they would be redundant and I would be working out of the spare bedroom still paying my mortgage. Until lenders systems can cope with underwriting the real world, more rules will restrict borrowing to many who could really afford it. I wonder what the default rate is on borrowing sanctioned by a branch manager imparting individual knowledge and discretion compared to 'computer says yes - or no'.
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memory | 24 Mar 2010 4:14 pm
They tried using Miras as a way of double checking income but binned it on the basis of cost..........when the market returns to normal which it will then guess what will happen?
Income verification ? what about afforability....even better underwiters who underwrite.
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Mic2002 | 24 Mar 2010 4:43 pm
Why should the taxpayer fork out to try to protect lenders if this is all its all about? Classic case of the FSA and others simply totally overblowing the fast tracking /self cert issue instead of the affordability.Another amazing example of nanny state and big brother by this Govt. Lets remove any risk from the mortgage market and support those lenders we mostly bailed out.Incredible.
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Anonymous | 24 Mar 2010 4:49 pm
Good!!!! Creative accounting/tax dodgers/crooks if you earn the money pay the tax.

Why should the employed masses have to be 100% geunine and others get free reign to avoid tax?
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Dave P | 24 Mar 2010 4:52 pm
I can’t see anywhere in the Budget statement that supports the views expressed above. The reason the HMRC pilot scheme was initiated was to combat the increase in mortgage fraud and not to persecute the self employed. The pilot scheme provided an excellent way for lenders to verify income details (whether employed or self employed) if the details provided by the applicants were doubted. I don’t go along with the conspiracy theorists that it provides an opportunity for HMRC to catch out tax avoiders and welcome its introduction.
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