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Turzanski says that capital markets are looking for alternative funding solutions outside of CMHC’s program, but with no real electronic registry in Canada it has yet to materialize. CMHC has gradually been reducing Ottawa’s exposure to the housing market and this could help with that effort.

“The government might want to reduce its exposure to the securitization (market),” he said. “Perhaps this could allow non-insured product to be sold to the comfort level of whatever that investor is.”

The impetus started when CST pitched one of the banks, one of the three largest in the country, to act as its custodian for records and that financial institution then needed approval from CMHC.

Joaquin Ortigosa, manager of securitization policy at CMHC, said companies like CST maintain program specific documentation like legal agreements that affect the transfer of mortgages from financial institutions and powers of attorney that allow the Crown corporation to take beneficial title in the event of defaults.

Karen Bailey, director of securitization operations at CMHC, said there are electronic copies of all these documents, but they are not digitized in a way that is searchable. “It’s not just taking a paper document to be copied,” Bailey said. “There is room for a value-added service which CST seems to be offering.”

Ortigosa didn’t think CST’s entrance would add any liquidity to the market but said what CST is doing could add value to other players like investors. “They can gain access to the underwriting file, if they need it,” he said.

Neither would comment on what the news might mean, if anything, to CMHC’s future in the securitization market.

gmarr@postmedia.com

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