More on Mortgages

Wall Street Journal Op Ed Contributor Arkadi Kuhlmann on April 11:

When banks have an incentive to keep loans on their own books, they are more likely to impose stricter standards on their borrowers. They are also more likely to work with borrowers to help them fulfill their obligations. The result is homeowners acquiring more equity in their homes, and fewer defaulted mortgages ...

A successful model exists to our north. In Canada, the interest on mortgages is not tax deductible, which gives homeowners good reason to pay down their principal as quickly as possible. Canadian banks also hold about 75% of their loans on their books, which encourages more prudent lending. Thanks to such policies, just 1% of Canadian mortgages are currently in foreclosure or delinquent, compared to about 14% of American mortgages. The Canadian real estate market has already rebounded above pre-recession levels.