23 Jul 2018
Canada’s housing agency has asked the country’s tax authority to take a “more direct and formal role” verifying income claimed on mortgage applications, part of a two-year plan to tackle mortgage fraud, documents obtained by Reuters show.
Unlike tax authorities in the United States and the United Kingdom, the Canada Revenue Agency (CRA) does not verify income for lenders, even with taxpayer’s consent.
That may change, as Canada’s overheated housing market draws comparisons to the United States in the years before the subprime mortgage crisis, made worse because many borrowers overstated their income.
“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 an emailed statement.
The Canada Mortgage and Housing Corporation (CMHC) action plan, obtained by Reuters under public records laws, shows the agency is concerned about systemic risk posed by mortgage fraud.
The agency has said repeatedly that there is little evidence of widespread fraud in Canada, but it also says data is limited.
“The industry’s current detection tools have not kept pace with the increasing sophistication of threat we face,” says the plan, adding that paperless transactions, pressure to close deals quickly, rising prices and new regulations “create strong incentives for individuals or mortgage professionals to engage in opportunistic – or criminal – fraud.”
The documents describe several other initiatives, including the roll out of Citadel, software from Equifax (EFX.N) that flags high-risk mortgage applications.
Isabel Vives, CMHC’s Manager, Mortgage Insurance Fraud Risk Management, said the agency has been testing Citadel since January and plans to go live within a few months.
– By Allison Martell, Reuters 18 July 2018.
Link to Reuters.
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