Home Loans and Politics, bad news

Re: Jingle mail a U.S. (and British) disease?

Be interesting to compare and contrast home lending behavior, defaults and bank / government agency losses to, say, Australia, where home loans are recourse loans. If a wealthy individual did what is talked about here, the bankruptcy judge would review their lifestyle and sell everything but the cheap furniture, one car, tools they use in their trade, un-enroll the family from the "medigap"-like private plan for the well-to-do ("you’ll use the public ward like the rest of us"), deny them funds to send their children to private school, and garnishee everything but the basics until the note was paid in full. And they tend to publicize these cases to discourage future speculative behavior (beyond the individual’s ability to bear the loss).

The only notes the bank struggles with are entry-level homes made to the "poor deserving" who obtained some welfare underwriting and then had a personal disaster, breadwinner dying or dead, etc. And since home values didn’t plunge (because the government controls number of new home permits) the actual loss to the banks is minimal (home quickly resells). I’ve had reasons to visit with some of the bankers in Western Australia and they tell me that their collateralized mortgage obligations are still selling like hotcakes, demanding a premium on the world.

It seems that when we protect the borrower from taking a haircut, little good results. What’s the inverse of regulation? Out of control acceleration? Seems regulators/regulation need not all be of the “slow down” variety.

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