A minority of US states have non-recourse loans, including California and Washington State, so nobody can suggest they are incompatible with Common Law systems or are unworkable or punitive for lenders.
A non-recourse loan is where, if you cannot pay your mortgage and your house is repossessed, the lender is entitled only to what they can raise through the sale of the house. Should that be inadequate (and of course there are usually fees and charges added) then the mortgagor is not liable for the rest, whereas under English law – and as far as I’m aware everywhere else in Europe – you can be pursued indefinitely for any balance outstanding.
If UK mortgages (I’d suggest both commercial and domestic) were automatically designated as non-recourse loans, this would serve two purposes:
1. Encourage lenders to be more wary of continually bidding up the housing and property markets. And so help stability.
2. Redress a little the balance between borrower and lender. In contrast to the current position, lenders would have the awareness that if they over lend then they are just as likely to suffer as the mortgagor.
There is no time like the present for this sort of measure – the housing market is barely rising and so lenders are unlikely to consider lending 100% or more of the purchase price to borrowers (which was not unknown in times of boom) and ‘Help to Buy’ is still in place, so this measure could be a small quid pro quo.
And it would be much better than tinkering with stamp duty.