The Ongoing International Banking Collapse

jamesd

I did miss one wrinkle though: in many parts of the US you can walk away from your property and mortgage and owe nothing, leaving all of the loss in the hands of the lender. Here if you get repossessed you still owe the lender the mortgage amount that's not recovered by the sale. That in the US gives many an inventive to walk away from their debt once they are in negative equity, while here in the UK that incentive doesn't exist because the money is still owed.

Hence moral hazard abounded in the US: both originators and borrowers could walk away and leave the securitised mortgage buyers paying the price.