Residential Market Commentary – Clamping down on fraud
There are growing concerns that the Canadian housing market is becoming a hot bed for nefarious activities.
A recent report by the C.D. Howe Institute expresses grave concerns that Canada’s housing market has become a haven for money launderers and Canada Mortgage and Housing Corporation is pushing to get the taxman involved in clamping down on mortgage fraud.
Documents obtained by Reuters show CMHC is calling on the Canada Revenue Agency to take a “more direct and formal role” in verifying income claimed on mortgage applications. It is part of a two year plan to clamp down on fraud.
Canada’s hot housing market is often viewed through the lens of the subprime mortgage collapse in the United States. Many observers say that crisis was made worse because so many borrowers overstated their income. The CRA says it is looking at ways to provide that information securely, privately and with borrower consent.
The C.D. Howe report says weak Canadian rules make this country particularly attractive to foreign nationals who are looking to launder money through real estate. Report author Denis Meunier – former deputy director of the anti-laundering agency FINTRAC – estimates as much as $100 billion a year may be laundered in Canada. He blames laws and regulations that allow hidden ownership of assets like real estate.
Meunier points out the average person has to provide photo-ID and proof of address to obtain something as simple as a library card. There are no such requirements when registering a corporation, which could easily be a dummy or a shell company used to hide assets and launder money.