The United States and other developed countries have robust social safety nets that provide households with assistance in the case of job loss, a workplace accident, disability, or health or other problems. Throughout the Great Recession, as home values declined and foreclosures proliferated, housing issues dominated debates on economic policy. A key motivation for policy intervention was to avoid the costs of fore-closure borne by borrowers, lenders, and even those in the surrounding communities. Despite general agreement on the motives for intervention, policymakers struggled to design and implement effective policies. Debate centered on whether foreclosures were caused by job loss, payment shocks, or underwater borrowers' incentive to "strategically default." Accordingly, policymakers debated whether programs should focus on improving borrowers' ability or their incentive to repay.
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