Most people don't have problems with their bank , sure they are greedy but not as greedy as the alternatives .
I fear your proposals will provide protection for the Gamblers .

Thats one way of making a profit at the banks expense.

Er, barley, Garum Masala and 579. Weren't the banks the big gamblers? i.e. Lending into a bubble-inflated residential market without employing proper risk management practices? Tom sixpack should pay up and shut up, thereby indemnifying banks from their negligence?

That is a very thoughtful article Gavin.

You have identified quite a few little rorts that the banks are into. On second thought maybe you have identified some big rorts.

I don't agree completely with everything in the article, but rather than quibble I just want to say well done. Don't be deterred by the thoughtless drivel that gets posted here as comments. There are intelligent people out there who appreciate your work.

Why should you be liable for the shortfall!
Get a grip of yourself, you are saying ,because values have fallen the contract you signed is void. Look at it the other way, if values have risen, and you default, as it is now, the bank sells and you get the overpayment. Be realistic. A contract is a contract, If you borrow when the market is up, that is your decision.

The author’s proposal that banks shouldn't be able to claim more than their collateral when a borrower can't repay their loan is superficially appealing but would lead to some perverse outcomes. This form of loan has contributed to the magnitude of both the boom and the bust in the US housing market.

Tt exacerbates the boom-bust housing cycle by introducing asymmetrical risks for borrowers - if house prices rise, borrowers win; if prices fall, they don’t lose. So borrowers do not carry the consequences of their bad decisions, and are encouraged to make risky investments. This will make price booms longer and stronger.

It would also prolong and deepen the downturn in sales and prices during the subsequent bust, because it encourages mortgage holders to walk away from loans that exceed their houses’ prices. This would lead to a flood of properties on the market at exactly the worst time in the housing cycle, when prices and demand are falling.

Both of these have contributed to the housing crisis in the USA.

Banks, of course, would be well aware of this. They would impose stricter conditions and demand higher interest rates of borrowers to compensate for and offset the additional risks they would have to carry. They would be more risk averse in who they lent to. In the USA, the government attempted to offset these problems by setting up Fanny Mae and Freddie Mac to lend to high-risk borrowers the mainstream banks would not touch. This of course, further exacerbated the downturn.

There are a host of other probable perverse incentives that would flow from the proposal, from under-insurance to poor maintenance