The United Kingdom suffered a hit similar to America during the financial crisis; however, each country has a different method to approaching the problem.
But is the U.K. doing it better?
According to an article in the American Banker, the U.K. offers a new guarantee scheme as a part of their Help to Buy program, aimed to bolster its housing market.
The article explained that eligible mortgages under the guarantee program must have a loan-to-value ratio between 80% and 95% on a maximum property value of 600,000 pounds for borrowers with good credit histories and income.
The program offers a practical example of what could be an effective way to provide a federal guarantee while limiting the potential for adverse selection that has dogged the FHA for years, the article said.
Under the Help to Buy guarantee program, lenders could opt in to buy government insurance for losses incurred above 80% of the purchase value of the property. In that layer, the lender would still be on the hook for 5% of the losses that occur above the 80% threshold and the guarantee would be in place for up to seven years.