Feds commit to exploring CRA income verification in budget 2024 to address mortgage fraud

  4/12/2024 |   SHARE
Posted in Government and Regulation by Vanguard Realty | Back to Main Blog Page

The federal government today confirmed plans to consult with the mortgage industry on developing income verification tools through the Canada Revenue Agency.

The announcement was part the government’s new housing strategy entitled ‘Solving the housing crisis: Canada’s Housing Plan.’

“Independently verifying borrower income helps financial institutions detect and deter the types of fraud or misrepresentation that can increase the costs of mortgages for all borrowers,” the plan reads. “Budget 2024 will propose the government’s intention to consult with the mortgage industry on making a tool available through the Canada Revenue Agency to verify borrower income for mortgages.”

The government is also promising additional funding for the CRA to crack down on real estate fraud.

Reaction has so far been positive from industry members who had been lobbying for such changes as an effective step in reducing mortgage fraud.

In an update to members, Mortgage Professionals Canada said it is “proud that our efforts around the issues and use of digital income verification have yielded this kind of attention from the highest levels of government, and we [are] confident that the collaboration between the CRA and the housing and infrastructure sector stakeholders will ultimately benefit homebuyers.”

In a social media post, mortgage broker Ron Butler called the announcement “great news.”

“We had zero commitment [on this from the federal government] for the last 15 years,” he added. “I will take this as a win.”

In November, Butler and MPC’s director of government affairs, Jasmine Toor, appeared before the House of Commons Standing Committee on Finance advocating for the adoption of a digital income verification tool.

“There is way too much income document fraud in Canada,” Butler said. “It would be very useful and a very simple fix to simply say ‘CRA, we need some linkage to the big banks who have highly secure systems.”

Currently, mortgage applicants must prove their income using documents from the CRA’s My Account service, such as tax assessments or T4 slips, or they have to request physical copies of these documents.

Mortgage fraud in Canada has been a growing problem in recent years, with Equifax reporting fraud cases are up 52% since 2013.

The problem has also become a costly one for lenders, with research finding that every $1 lost to fraud costs Canadian financial services firms over $3.78 to recover.

Ben Rabidoux, an analyst with Edge Realty Analytics, called the income verification announcement “a big deal.”

In a social media post, he said that while some critics may downplay the promise to consult with the mortgage industry, he said they’re missing the broader context.

“Our government just acknowledged that mortgage fraud is a big issue,” he noted. “That seems kind of important.”

Highlights of the government’s housing plan

The release of the federal housing plan comes one day after the government unveiled new measures it says will help address housing affordability for first-time buyers. That included extending the maximum amortization period from 25 years to 30 years for insured mortgages on new builds and increasing the Home Buyers’ Plan limit to $60,000 from $35,000.

Additional measures unveiled today as part of the government’s housing plan include:

• A plan to build 3.87 million new homes by 2031, including 2 million net new homes in addition to the 1.87 million homes that the Canada Mortgage and Housing Corporation forecasts will be built by that year.
• An additional $15 billion allocated to the Apartment Construction Loan Program to ensure the construction of at least 30,000 new rental apartments.
• $10 million invested in the Skilled Trades Awareness and Readiness program to motivate high school students to pursue careers in the skilled trades.
• $50 million directed to the Foreign Credential Recognition Program, specifically to support residential construction and assist skilled trades workers in building more homes.

Source: Canadian Mortgage Trends

Government of Canada, Mortgage Consumers