Will CRA involvement reduce mortgage fraud?

Will CRA involvement reduce mortgage fraud?

Will CRA involvement reduce mortgage fraud?

The Canada Mortgage and Housing Corporation is petitioning the Canada Revenue Agency to take a more active role in detecting fraud, but is its concern overblown?

“If, for instance, you committed fraud and said you make $200,000 when you, in fact, make $30,000 and you qualify for an $800,000 mortgage, you would have defaulted by now,” said Laura Martin, Matrix Mortgage Global’s chief operations officer. “Toronto and Vancouver have some of the lowest default rates in the country at 1% and 1.5%, respectively, compared to the 2.2% Average in the U.S. during the 2008 Crisis.”

Added Daniel Johanis, a Rock Capital Investments broker:

“I would say that there’s definitely a direct correlation with the default rates in larger metropolitan areas and fraud. If we’re seeing lower default rates in Toronto and Vancouver, it’s pretty safe to assume the majority of people who are attaining mortgage insurance are able to meet those obligations.”

However, in a report, CMHC determined prospective homebuyers inflate their reported incomes far more often than they do with the CRA. But the report could not deduce how much fraudulent statements affect mortgage default rates.

Moreover, CMHC believes notice of assessments copies—which can be printed from the CRA’s website—can be easily falsified. While calling employers is perhaps the most accurate way of determining an applicant’s true income, NOAs are more popular and an accepted federal underwriting guideline.

Martin notes that discontinuing its use isn’t so simple.

“The fact that the NOA can be falsified is true, and securely sharing the income between the CRA and lenders would be a clear benefit in that it’s in line with global standards and best practices,” she said. “However, this will not solve the overstating of income issue, in terms of stated income programs existing. They’re using NOAs and T1s plus accounting statements and business contracts, and then the declaration. These stated income programs need to exist because over one in six people are self-employed.”

Martin also maintains that if somebody wants to commit fraud, they will irrespective of preventative measures.

“People who are determined to commit fraud will still do so with account statements,” she said. “Furthermore, CMHC’s reasoning is circular and weak; by its own admission there’s low fraud frequency, but their fraud detection ability is also low because of the complexity that’s arisen. There’s more technology now and fraudsters are getting smarter, so it’s hard to stay ahead of them.”


Related stories:
CMHC pushing for stricter fraud detection mechanisms
Delinquency rates low for large mortgage loans


  • John Smith 2018-08-13 11:18:12 AM
    This is contrary to ppl's rights to Life, Liberty and Security of the Person. We've gotten more and more used to our info being out there and less diligent of our rights as a result. It's imperative to hold the line. The Mortgage Broker's Assoc should fight this. Not sure where Ms Martin got her rates of default from, in fact they're .25%, and that's your best argument against said changes. They're not needed!

    Post a reply
  • 2018-08-13 1:59:30 PM
    If CMHC or any lenders who is genuinely concerned or as per this article CMHC is very well aware of the fact that people can inflate their reported income on NOA'S with the help of fake T1 General, then my question is what have the CMGC done in-last 55 years to curb this issue?

    My suggestion would be to enact a law that any person who inflate the income with the help of fraud NOA's to obtain the mortgage, should be penalized by calling -off his mortgage for at-lest 10 years and should be blacklisted and no lending institution should extend any loan to him/her in the entire country.

    Post a reply
  • Ali 2018-08-13 2:18:16 PM
    Should get a clearance or YTD annual income statement.It will help CRA as well to prosecute those people who making money and buying properties but not paying due taxes rather they claiming lots of child banifits.
    Post a reply