“because they bought houses that were already overpriced and unaffordable to them” are two different issues.

Overpriced is a matter of opinion and irrelevant to this discussion. Based on my experience as a Realtor, at least 50% of the people who I see in trouble refinanced and pulled equity out of their homes. If they hadn’t done that, they would be able to afford their payments. The other half simply shouldn’t have gotten tied up in that size of mortgage and the banks allowed them to do so instead of saying no, you can’t afford it. Then there is a small percentage of people who lost a job, lost a spouse, had a medical problem, etc. that caused their income to change and they can’t afford their home.

Is it the government’s job to help any of these people? In my opinion, it would probably be better for the banks to step in on a case by case basis, but even though problem loans represent a small percentage of all loans it’s a huge volume for banks to deal with.