In the U.S. mortgage loans generally fall into two broad categories: Recourse loans, where the lender can sue for default for any money owed after foreclosure: and Non-Recourse loans, where the lender is only allowed to repossess the home.
In Europe most home loans are recourse loans while in the U.S. most loans are non-recourse. The default rates on mortgages that are higher than the value of the home (underwater) is substantially lower in Europe.
Do you think in the future, the U.S. should make all second home loans, no doc loans, or loans that exceed three times the borrowers annual income recourse loans and only allow non-recourse loans for primary homes within a feasible price range?
It would more evenly split the risk between borrower and lender . . . without having the Federal government dictate borrowing standards.
What do you think?
