Lauren van den Berg, CEO of Mortgage Professionals Canada, explained that mortgage fraud occurs when someone provides false or hidden information to obtain a loan they wouldn’t otherwise qualify for. (AP Photo)
Fraud in Canada’s mortgage market has become a pressing concern. Lenders and brokers say they need a better way to verify borrowers’ incomes. They argue that a direct link to the Canada Revenue Agency (CRA) could prevent fraud and protect honest homebuyers. But critics warn it could be a privacy overstep.
Why Mortgage Fraud Matters
Mortgage fraud occurs when someone misrepresents or hides information to get a loan. Lauren van den Berg, CEO of Mortgage Professionals Canada, explains there are different types.
“‘Fraud for shelter’ is when borrowers exaggerate income or hide debts to qualify,” she says. More serious cases, like ‘fraud for profit,’ involve falsified documents or inflated property values. Organized crime sometimes uses real estate to launder money, a practice called ‘fraud for laundering.’
These schemes push home prices higher. “Homes get flipped at inflated values or left vacant, reducing supply in a tight market,” van den Berg adds.
The Proposal: CRA Digital Income Verification
Currently, fraud detection relies on document reviews, credit checks, verification, and risk scoring. Brokers and lenders also report suspicious activity under FINTRAC rules.
The main gap? Lenders cannot directly confirm income with the CRA. They depend on T4s, pay stubs, or tax returns—documents that can be forged.
Mortgage groups want the CRA to launch a digital income verification tool. With borrower consent, lenders could instantly confirm income data from the CRA.
Van den Berg believes this could close the loophole. “It would cut off one of the easiest ways to commit fraud, protect honest buyers, and improve fairness in the market,” she says. The Canadian Bankers Association supports the initiative, noting it could also reduce calls to CRA centers and improve taxpayer experience.
Privacy Concerns
Not everyone is convinced. Andrey Pavlov, finance professor at Simon Fraser University, calls the proposal risky. “Granting CRA access to lenders sets a dangerous precedent,” he warns. Other businesses or government bodies might demand similar access.
He also notes the CRA has historically kept income data secure for good reason. Lenders vary in their ability to protect sensitive information, and breaches do happen. Pavlov suggests enforcing strong underwriting standards and prosecuting fraud cases instead. These steps, he says, reduce mortgage fraud without exposing borrowers’ private data.
Moving Forward
The federal government acknowledged the issue in its 2024 Fall Economic Statement. It confirmed that the CRA is consulting the financial sector on designing a new tool to fight mortgage fraud, with potential implementation in early 2025.
Between November and December 2024, the CRA held consultations with the mortgage industry. Their July 2025 report says the agency will use the findings to shape the tool, considering borrower needs, preferences, and concerns.
Meanwhile, industry groups continue to press Ottawa for progress. They argue that secure CRA access could streamline processes, prevent fraud, and make homebuying fairer for everyone.
Balancing Fraud Prevention and Privacy
The debate highlights a key tension: preventing mortgage fraud while safeguarding personal data. Mortgage professionals see CRA access as a practical fix. Critics urge caution, warning that privacy risks could outweigh benefits.
Canada’s mortgage market now waits to see whether a secure digital income verification tool can bridge this gap—or whether privacy concerns will stall the initiative.
