> Fail to make your payments and see the true owners of your house take it away from you.
The notion that the collateral for a loan could be repossessed because of non-payment is not convincing.
I still own the house. I can make decisions regarding modifications to it without seeking permission from the bank that loaned the money to me, even if such modifications would lower the value.
> Credit and lending are literally responsible for global economic collapse. It destroys the lives of so many it's not even funny.
No, bad credit and lending are responsible. Sub-prime mortgages, ARMs, and "balloon" mortgages.
In your fantasy world where credit no longer exists, home ownership would drop considerably. Very few people would be able to save the money to buy a home because they would have to pay rent while saving up the money. When I bought my house in 2015, I was paying about $1,000/month for rent. The house I bought is costing me $1,500/month for 30 years ($320K @ 3.85%).
Obviously, that $1,500/month includes interest. A lot of it. So let's assume instead I'm saving money and living in that apartment still. Assume that I'm risk-averse and don't invest my money. At $1,500/month, it would take me 18 years of saving to buy that house
Oh, but home prices are almost always going up. The $338K house (I put $18K down, and most of that was a gift from my in-laws) I'm in is currently worth $550K. It would take 30 years of saving to buy this house at that price.
And the worst part is, the entire time, I'm still paying rent somewhere. And that rent is always going up as well! I would need to have a very considerable amount of disposable income in order to save up to buy a house! In 2015, I could afford a $1,500 mortgage. I could NOT afford to pay $1,000/month in rent AND set aside $1,500/month for a house in the future!
So...you'd significantly reduce how many people could buy a house. You'd think "Well, the lower demand would lower prices!", but that's probably wrong. What would happen is that real estate investors would buy up the houses. The big banks already have the cash on hand. They buy them up, rent them out, and further lock people out of homeownership.
Wealth inequality grows, and the economy suffers. The rich get richer as they extract money via rent, building more wealth to buy more houses to rent out.
Your parents were able to buy a house while home prices relative to wages were better. Good on them. But to eliminate the idea of credit now would be a real "I got mine" move.