Today we will be talking about one reason so many US households defaulted on their loans: in the US, the loans are non-recourse. The loan is secured by property only and the lender cannot take over other assets of a defaulting household. The only penalty then is a bad credit rating. In Wednesday's New York Times there is an article that provides details. Some defaulting households can get another mortgage after as little as 2 years.
In contrast, in other countries the borrower is responsible with the rest of her assets. I once read a sad story of a Peruvian immigrant inn Spain. He bought a house near the peak of the boom which, in Spain, was much bigger than in the US. He could not pay the mortgage so he defaulted. The bank took over the house and sold it very cheaply. He ended up without a house but with a huge debt: he was responsible for the different between what he owed minus the (low) price the bank got. He was thinking of giving up and going back to Peru but, as I recall, he could not escape the debt because of an agreement between Peru and Spain. He lost everything he had and could not afford to go home.
The different treatment of loans is the reason that, while US households default often, European households do not.
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