Such spending may well crowd out the provision of other types of public services. Fiscal and monetary stimulus directed at improving employment conditions and federal support for housing finance will ultimately strengthen the housing market. However, we also need measures that directly address the foreclosure problem associated with the current crisis.
In designing such measures, we must consider that there are different types of borrowers. First, there are distressed borrowers who can avoid foreclosure through an appropriate modification of their loan. Second, there are some borrowers who, due to resources or circumstance, will be unable or unwilling to sustain their mortgage payments even with reasonable loan adjustments from the lender or support from government programs.