The issue is not whether a borrower will decide on his own to walk away
from a mortgage (TBT #665 "Flat price"). It is whether the bank will pursue the borrower for any deficiency between the amount of the loan and the amount for which the flat sells at an auction. Unless you live in California, where it is against the law, banks are free to chase borrowers for years to pay back the debt, and even take a percentage of their future wages. I have heard that some borrowers in Sweden are only now finally making their last payments on loans that they took in the early 1990s.
Obviously a millionaire borrower with a private yacht or plane can and should make up the deficiency, but The Baltic Times would well serve the public interest if it at least polled the major banks and asked them whether bank policy is now to chase the average salaried worker for years or write off the deficiency as a loss.
If Saiema enacted a law like California's, then banks would clearly have an incentive to be more careful in making loans, for they would have to live with the consequences of their lending decisions. If a borrower couldn't pay, then the bank would have only the property, and the borrower would have a fresh start.
Richard N. Golden
Amsterdam
