But can you compare to the US when you can just hand the property back to the bank? It feels like something that will make the downturn overshoot like crazy.
That’s a common misconception. There are a handful of states that allow on to ‘walk away’ from a mortgage (in 2008, only 12 states allowed it). But it is not a national law.
But even in States where one must pay the mortgage, lenders do not always pursue those who walked away. Why? Because who knows who the lender really is? And those who ended up holding the mortgage would most likely have to sue whoever sold them the mortgage, which was probably bundled with hundreds of other mortgages.
Complicated financial instruments are the root of all evil.
Ok thanks for clearing that up.