Mortgage industry consultation on a potential income verification tool

Status: Closed

Budget 2024 announced the Government of Canada's intention to consult with the mortgage industry about a tool to help lenders verify income for mortgages.

To get a mortgage, borrowers must disclose their sources of income. As proof, lenders typically ask borrowers to provide one or more of these Canadian tax documents:

• a proof of income statement
• tax information slips
• a notice of assessment
• a statement of income and deductions

Given the potential for mortgage fraud at the income disclosure stage of the transaction, the mortgage industry is interested in an income verification tool to improve the experience of the borrower and to combat possible fraud.

Consultation overview

In the fall of 2024, the Canada Revenue Agency (CRA) invited national associations within the mortgage industry to participate in roundtable discussions to gather input on a potential income verification tool to help combat mortgage fraud.

Participants had the opportunity to share their views on:

• current practices, challenges, and opportunities regarding income verification practices in Canada
• opportunities, considerations, and the need for a potential new income verification tool

In addition to the roundtable discussions, the CRA sought broader input from other interested and affected parties within the industry through an online questionnaire, which was open from November 14 to December 6, 2024.

What we learned

Current income verification practices and challenges

The major mortgage fraud trend identified through the consultations was:

• fake or altered documents

Other potential issues noted were:

• money laundering
• fraud to qualify for a larger mortgage
• fraud within the industry

Participants indicated that there are a number of CRA documents requested as part of the mortgage approval process, which may include:

• a notice of assessment or proof-of-income statement
• income slips, such as a T4 slip, Statement of Remuneration Paid
• Canada child benefit statements
• a statement of account to determine if the borrower owes money to the CRA

Steps taken to confirm the income reported by the borrower include:

• confirming employment directly with the employer
• examining requested financial documents from the borrower

Future income verification opportunities

The consultations confirmed that mortgage professionals want access to CRA-held information to either verify that the borrower’s documents are valid; or to get the documents directly without the need for the borrower to send them.

Participants suggested that the following entities should have access to an income verification tool:

• banks
• mortgage brokers
• credit unions
• other mortgage finance companies

To effectively verify a borrower’s income, most participants said that at least two years’ worth of information would be required, and the information should include the borrower’s:

• name
• total income (line 15000)
• net income (line 23600)
• taxable income (line 26000)
• debt owing to the CRA

Based on the above findings, the most useful CRA documents for the mortgage industry to verify borrowers’ income are:

• a notice of assessment
• a proof-of-income statement
• income tax slips
• a statement of account showing debt owed to the CRA

Participants expressed that an income verification tool should:

• include the borrower’s consent to share the information
• give users an immediate response
• be accessed through a secure online service, whether an existing CRA portal or a new one created for this purpose
• account for the fact that some borrowers may not have access to existing CRA online services
• be secure

Given the need for mortgage brokers to provide verified (official) documents to lenders, participants would like copies of CRA documents. However, a notable number of participants of the online questionnaire (41%) said it would be sufficient for the CRA to confirm that a borrower’s documents are valid. Participants highlighted that the CRA’s confirmation would need to be shareable with lenders and that the CRA should consider the potential for false negatives due to system errors.

Next steps

The CRA thanks all participants who took part in the consultation process. The full report on the findings will be posted on Canada.ca by March 31, 2025.

The CRA will continue to evaluate options to design a secure, digital tool that will meet the needs of the mortgage industry while protecting taxpayer privacy and security.