Crown corporation asks national tax agency to improve income checks
In its bid to crack down on fraud, the Canada Mortgage and Housing Corporation has petitioned the Canada Revenue Agency to take a “more direct and formal role” by verifying borrowers’ claimed incomes on their mortgage applications, according to documents obtained by Reuters under public records laws.
The petition is part of the CMHC’s two-year action plan that aims to stamp out mortgage fraud, which the Crown corporation said has introduced systemic risks to the Canadian economy.
The CMHC said that evidence of widespread mortgage and real estate fraud remains limited, hence the need for better data collection measures.
“The industry’s current detection tools have not kept pace with the increasing sophistication of threat we face,” the CMHC’s action plan stated.
Read more: Income misstatements on the rise
The plan noted that various factors “create strong incentives for individuals or mortgage professionals to engage in opportunistic – or criminal – fraud,” including stricter regulations, steady price growth, and an ever-increasing pressure to close deals as fast as possible.
Paperless transactions were cited as a particular point of vulnerability. The CMHC said that the notice of assessment generator in CRA’s online portal – which is an important avenue for self-employed individuals to verify their income – has the crucial weakness of being “easily falsified”.
“It means we need to make sure that we still have good, robust income verification. We need to evolve too,” CMHC manager of mortgage insurance fraud risk management Isabel Vives said.
The action plan came amid fears that the national housing market is beginning to resemble that of the United States just before the subprime mortgage crisis a decade ago.
“The CRA is currently exploring different avenues in which to improve how it delivers taxpayer specific information in a secure manner, including the feasibility of securely sharing tax information with financial institutions upon client consent,” the tax agency said.
In 2017, data from Equifax Canada indicated that suspected fraud increased by 52% since 2013.
Fiscal watchdogs caution about Canada’s untrammelled borrowing spree