This is a complicated situation that has lots of aspects. To the extent that government agencies like FHA and FReddie and Fannie have performed a function of buying mortgages and regulators saw weaknesses in their governance, they capped their activity and that put the brakes on, it squeezed the market and created a credit crunch. The caution seems wise. The inaction of Congress and their obsession with imaginary and feel good laws instead is negligent.
Consumers have short and long term memory loss. Remember the real estate markets in 1977, 1987, 1992? Same scenario, but back then, higher default rates...did it impact the economy...yea...but this current default phase is way lower than in those years...with an expanded real estate market to boot! This whole bail-out frenzy is political in nature...has nothing to do with solvency.