Look at the American experience and learn from it. People running the finance and banking and investment industries have the ambition of converting all work-a-day people into their serfs, their economic slaves, through debt. So they have structured (and obtained government approval) all contracts (notes, mortgages) to their advantage, and to the disadvantage of borrowers, and made them unilateral adhesions to prevent the borrowers from negotiating terms. Thus the lender has an easy, built-in judicial or non-judicial mechanism for foreclosing a loan in default, but no built-in mechanism exists whereby the borrower might obtain liquidated damages for appraisal fraud, loan application fraud by brokers, or various legal errors, contract breaches, or regulatory violations intended to protect borrowers, but to which borrowers have scant access because of lack of discretionary funds (if they had money the would not have needed to borrow more).
In the USA virtually everybody who can qualify for a loan (based on credit rating) HAS a loan of some kind, and pays interest. The greed for that interest led to securitization. The loan originators tend to make predatory loans that they know the borrowers cannot repay. They do it because they immediately sell the loan to a securitizing bank, so they have no responsibility to chase deadbeat borroweres for repayment. Even those who do chase the borrowers know that eventually they will force a sale of, or simply take, the collateral property with the court's or a trustee's help.
I estimate that some form of fraud or other torts, contract breaches, legal errors, and/or regulatory breaches underlie 90% of the mortgage loans in the USA. And the legal industry has few attorneys able and willing to find all those problems and litigate them on behalf of borrowers. Instead, the attorneys focus on "foreclosure defense" where they recycle cookie-cutter pleadings to drag the foreclosure process out as long as possible, thereby not actually defeating the foreclosure, but leading the client into the jaws of foreclosure sale of the property. Why? Because such borrowers cannot afford the fight it takes to beat up the crooked lender team. However, since they have stopped making house payments, they can afford to pay an attorney $300 to $1000 a month for the foreclosure defense. Many borrowers stay in the houses for 4 to 7 years without making any payments. Thus the legal community intercepts borrower money that the borrower should pay to the creditor.
Take note that when the Federal Reserve Board (central bank of USA) lowers interest rates, borrowers RUSH out to refinance their home loans or to borrow more so as to buy a better house or use it (the collateral) effectively as a ATM (automated teller machine), a source of discretionary cash, thinking they will flip (resell) the house when its value goes up (which it does because of inflation and the lower interest rate). Many use the money to fund a profligate, spendthrift lifestyle. As a consequence of lower interest rates since 2002, house values rose dramatically till the crash in 2008, then the values plummeted and many people lost jobs and foreclosures increased so badly they clogged the courts and created a terrible backlog. Now the Fed has lowered interest rates again, and predatory lending has increased along with house prices, heading for another collapse in the next 3 years.
How can any legislature prevent this kind of craziness?
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