In Israel, similarly to Canada and Australia, mortgage defaults are a non-issue. As in Canada, home mortgage interest is not tax deductible. The process for approval is very thorough, and funds given by the bank are generally transferred to the developer or seller directly. Additionally, the bank has recourse to the borrower's other assets in case of default.
One special twist on Israeli mortgages is that as a condition for receiving and maintaining the loan, the borrower must take out both property insurance on the home and a life insurance policy for the value of the mortgage, with the bank as the beneficiary. The bottom line is that the banks cover themselves from every angle.