If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.