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Canada’s financial industry is urging the federal government to consider alternatives to proposals that could require them to take on a greater share of mortgage defaults through a deductible — calling it one of the biggest shakeups to hit housing finance in 50 years.

“This submission has questioned whether a deductible is the most effective way to rebalance risks within the housing finance system,” the Canadian Bankers Association said in a report Tuesday. “The industry believes that policy alternatives should be considered to achieve the same ends, but are simpler and less disruptive to the existing lending structure.”

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Policy alternatives could include allowing mortgage insurers to buy reinsurance, and increasing Canada’s covered bond limit to boost private funding of uninsured mortgages and reduce taxpayer support for mortgage financing, the association said. Covered bond issuance in Canada is capped at 4 per cent of bank assets, which is lower than in most advanced economies, the group said.