	Introduction

This report discusses mortgage markets in selected nations and identifies aspects of housing finance that may suggest interesting policy options as Congress debates housing finance reform in the United States. Homeownership rates in Canada and the United States are similar, but Canada has stricter mortgage qualifications (i.e., underwriting standards). Australia reports a homeownership rate of 69.8%, whereas Japan's homeownership rate is usually estimated around 60%. Between 1991 and 2008, U.S. house prices increased 50%. House prices in Canada increased 60%, Denmark 150%, and Australia 107%. United States

In a benchmark competitive economic model, the interest rate on a fixed-rate mortgage (FRM) depends on four sets of factors: (1) the interest rate for a riskless government bond with the same life; (2) adjustments to reflect borrower risk; (3) adjustments to reflect risks associated with the characteristics of the property; and (4) adjustments to reflect the differences between the government bond and the mortgage. In the United States, the legal ability of lenders to seek full recourse from homeowners who have defaulted depends on state law, but until the recent recession, lenders frequently assumed that defaulters had few additional assets worth pursuing, regardless of state law. Closing costs are lower in most other nations. Other Nations

The only nations in the world offering long-term fixed-rate mortgages are the United States and Denmark . This creates the risk that homeowners will not be able to afford the new payments. Denmark and Canada place less emphasis than the United States and Australia on homeownership as an aspiration. Canada, Denmark, and Australia have some tax support for owner-occupied housing. Arguably, underwriting standards in Canada, Denmark, and Australia have been stricter than in the United States. Based on the length of the mortgage when it was initially taken out, the interest rates on most (62%) Canadian mortgages are fixed for four to five years, but interest rates were fixed for one year or less for 10% of mortgages, and only 12% of mortgages had fixed interest rates for more than five years. Taxation

Mortgage interest is not tax deductable in Canada. Low-income homeownership programs frequently target indigenous populations. Key differences between the mortgage finance systems in the United States and Denmark are as follows:
In Denmark, borrowers have two options to refinance: they can refinance as in the United States or they can purchase their mortgage at the current market price. Denmark has statutory underwriting standards that would disqualify some homeowners in the United States. ARMs generally offer lower initial interest rates (and monthly payments), but future payments and interest rates are not known. There is no tax on capital gains from the sale of one's primary residence. Australia

The U.S. and Australian housing finance systems exhibit both similarities and differences. The Australian government has no equivalent to the U.S. government's guaranteed mortgages. This is called the "balance principle." Conclusion

The mortgage markets in all four nations—the United States, Canada, Denmark, and Australia—seem to have more differences than features in common. Canada

Canada Mortgage and Housing Corporation.
The United States, Canada, Denmark, and Australia are advanced economies that share many features, but their approaches to financing homeownership have differed. As the U.S. Congress considers housing finance reform, the experiences of these other nations may suggest some potentially useful policy approaches.
In recent years, homeownership rates in the United States, Canada, and Australia have been similar: 66.9% in the United States, 68.4% in Canada, and 69.8% in Australia. Denmark's homeownership rate of 54.0% is low for this group of nations and for countries with developed economies.
Of these four nations, only the United States and Denmark offer mortgages with payments that are fixed for 30 years. In Australia and Canada (and most of the world), mortgages adjust to current interest rates at intervals of one month to five years. Of the four nations, between 1991 and 2008, house prices increased the most in Australia and Denmark, but other countries including Ireland, the Netherlands, New Zealand, and Norway had still greater increases. Underwriting standards have been the most flexible in the United States and less flexible in Canada and Denmark. Some homeowners in the United States would not qualify for mortgages in Canada or Denmark. The United States and Australia have programs to encourage homeownership. Canada offers limited support for home purchases, and Denmark has no homeownership programs. Nevertheless, homeownership rates are similar in the United States, Australia, and Canada. U.S. and Canadian governments directly or indirectly guarantee most mortgages and assure lenders that mortgage payments will be made in a timely manner. Australia and Denmark have no such government guarantee. In Canada, Denmark, and Australia, borrowers who default remain responsible for any unpaid balances, but it is not clear how frequently this is pursued. In the United States, the ability of lenders to seek compensation beyond a foreclosure sale depends on state law and frequently this remedy is not invoked. Capital gains from the sale of one's main home are usually tax-exempt in all four nations; all but Canada allow taxpayers to deduct mortgage interest payments.
Only the U.S. government has a maximum size on the mortgages that it will support. In the other nations, government support is offered to all mortgages.
This report will be updated as warranted.