Ottawa Plans CRA-Backed Income Verification Tool to Streamline Mortgage Approvals
Lenders are welcoming a federal budget proposal for the Canada Revenue Agency to establish a system to verify mortgage applicants’ income, a move that the industry says is long overdue to reduce paperwork and prevent fraud.
Currently, mortgage lenders must verify income documents themselves. It’s a tedious process for both the applicant and lender, one that requires pay stubs, tax assessment documents and multiple months of banking history to ensure a borrower isn’t misrepresenting their income.
The proposed federal government system would provide mortgage lenders and insurers the option to quickly verify an applicant’s income with the CRA, eliminating the need for paperwork.
The federal government has committed $13-million over three years to develop and pilot the system.
Over time, lenders say the administrative savings could reduce approval timelines and create a modest decrease in borrowing costs.
An income-verification portal run by the CRA would also make it very difficult for an applicant to fraudulently misrepresent their income, industry professionals said.
“With the ability of AI to generate these documents, it’s getting harder and harder to confirm whether they’re fraudulent or not,” said Bryan Jaskolka, chief executive officer of CMI Financial Group, an alternative mortgage lender, adding that his company has come across suspect documents before.
Data from Equifax Canada, one of the country’s two main credit data bureaus, show the national rate of mortgage fraud was at 0.2 per cent in the second quarter of 2026, meaning two out of every 1,000 applications were fraudulent. The rate is slightly higher in Ontario at 0.28 per cent. Almost all fraud cases revolve around income misrepresentation by the applicant.
A 2025 CRA report found that every dollar lost to fraud cost lenders $4 to recoup. The report also said the foreclosure process on a property where the borrower is unable to pay could cost the lender 20 to 30 per cent of the property’s value.
“If you can eliminate fraud, the system becomes more fluid. There’s less friction in the system and the cost of borrowing drops,” said Gary Schwartz, president of the Canadian Lenders Association, which represents more than 340 banks and lenders across the country.
He characterized the government’s $13-million budget for the program as adequate to fund a pilot project.
“It’s a fair chunk of money, and what I hope is that stakeholders from all different flavours of lending are represented in the pilot,” said Mr. Schwartz, who said the pilot should include banks, credit unions and alternative lenders.
Mortgage Professionals Canada, or MPC, which represents more than 1,000 companies across the industry, said it was advocating for mortgage brokers to also be able to access the proposed income-verification service. It said they are not currently part of the government’s plan.
However, Ron Butler, a Toronto-based mortgage broker and advisory council member of MPC, said he isn’t concerned about brokers not being given access to borrowers’ sensitive data, since they are sending all applications to a lender anyways.
Mr. Butler also said the industry has long been waiting for a government-run income-verification portal, adding that the United States has had a similar system in place for nearly 20 years.
He noted that the 2024 federal budget, under former prime minister Justin Trudeau, had promised a similar system, albeit without any financial commitment.
“It’s crazy that, at the end of the day, we never initiated something that is just reaching the 20-year anniversary mark in the United States.”
Mr. Butler said there were high rates of mortgage fraud during the pandemic, when applicants were faking documents as a way to get into a booming real estate market.
Today, those same fraudulent applicants are among the people having their homes foreclosed and sold by lenders after they were unable to make payments during the housing and economic slump, he said.
This article was first reported by The Globe and Mail
