* CMHC chief says needs to remain vigilant
* Says problem not pervasive within industry
* Calls for more homes to tackle affordability issues (Recasts, adds comments on mortgage fraud)
TORONTO, June 1 (Reuters) - The head of Canada's housing agency, whose responsibilities include maintaining the stability of the country's housing market, said on Thursday there was no evidence of widespread fraud in Canada's mortgage industry.
Home Capital, one of Canada's biggest mortgage lenders, has scaled back on lending to focus on repairing its balance sheet following rapid deposit withdrawals after a management shake-up and accusations brought by a regional regulator that it had misled investors about its mortgage business. The company has said the accusations are without merit.
"There is not evidence that fraud is a widespread problem within the industry but we know it happens. It's very hard to find and incentives exist for frauding the system so we need to be vigilant," Evan Siddall, chief executive of Canada Mortgage and Housing Corp (CMHC) told reporters.
"We don't think this is a pervasive problem in Canada. It is a discreet issue," he added.
In an earlier speech to business leaders in Toronto, Siddall said that Canadians will continue to struggle to afford new homes unless more is done to address supply issues as economic growth and new immigrants ramp up demand for homes.
"Canada's housing affordability challenge will only get worse without more and faster supply. Urbanization is a global trend and Canada's embrace of immigrants will add to the future need for housing, particularly in our cities," he said.
Canadian authorities have taken a number of measures to try to cool rampant housing markets, particularly in the cities of Vancouver and Toronto, which has seen a 33 percent price rise in the past year. The increases have raised concerns many Canadians have been priced out of the market.
Canada's Liberal government has said it plans to invest C$11.2 billion ($8.3 billion) in new housing over the next 11 years. ($1 = 1.3483 Canadian dollars) (Reporting by Matt Scuffham; Editing by Chris Reese and Chizu Nomiyama)