Less than a year since Titularizadora Colombiana inaugurated the country's mortgage-backed market, this quasi-Fannie Mae is feeling out a risky new asset class: non-performing loans. Making up 22% of Colombia's total residential mortgage pool, this bad stuff is a millstone around the neck of the banking sector.

But if Titularizadora's past success is any indication, the agency may be up to the challenge. Already it has begun declawing the industry's other beast: a lopsided balance sheet. In Colombia, half of all mortgage loans are in inflation-indexed UVRs, while liabilities are in short-term pesos, leading to some steep gaps in both liquidity and duration.

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