Maybe some distressed borrowers should have known better, and maybe some were innocent victims. I think it's impossible to generalize.
I think that whether an individual home owner or home borrower was a victim is something that ought to be judged on a case by case basis. As a thought-experiment, consider doing that with a jury system.
Set up a pity fund, and let anyone who thinks they were hurt by the mortgage crisis apply for a gift from the fund of, say, $20,000. The decision would be made by a jury consisting of ordinary citizens.
The jury would begin by selecting a default charity. Any money they don't give to the applicant would go to the default charity. This would serve as an indication of opportunity cost.
After hearing the applicant's case, the jury could decide to award all, some, or none of the money to the applicant. The remainder would go to the default charity.
The advantages of the pity fund over a government program include:
--judgment based, rather than rule based
--clear understanding of opportunity cost
--democratization, in that spending decisions would be made by average citizens rather than by central authorities
I'm not saying that this is a practical proposal. But I think that giving it thought and consideration would lead you to insights about how government might be improved.