The city plans to implement a Hong Kong-style mortgage securitisation programme to help ease the potential short age of funds for flat purchases. Shanghai has since 1992 been implementing a residential mortgage system in which home-loan financing came out of a pool of pension fund contributions from citizens and their employees. Shanghai Housing Authority deputy secretary-general Wu Zhengtong said the securitisation programme could help develop the city's debt market and better utilise money provided by pension funds. Admitting residential mortgages might not be appealing to international investors because of perceived lower asset quality, Mr Wu said Shanghai would first introduce a credit enhancement scheme for the assets. The scheme essentially works like an insurance policy against default. Mr Wu said the authority intended to establish a separate credit risk guarantee company, operating along the lines of an insurance firm, to implement the scheme. The company, which would sub-contract the risks to re-insurers in the mainland, could help diversify the risk of defaults, he said. The mortgage loans provided by the pension fund had been approved and delivered through the Shanghai branch of the China Construction Bank. From the beginning of this year a number of domestic banks are invited to provide top-up loans to the home buyers who find the mortgage loans from the pension fund - which has a per-loan ceiling of 100,000 yuan (about HK$93,099) - not enough to cover their purchases. In other words, the China Construction Bank would no longer be the sole institution which assessed borrowers' repayment capabilities and approved the loans. Mr Wu said the planned guarantee company would be designed to operate like a mortgage broker, which accepted mortgage applications, screened applicants and directed them to the banks. 'In such a way, the procedures and criteria for applying for and approving mortgages can be standardised and we can strengthen our control of asset quality,' he said.