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Vicky O'Brien

Albuquerque, N.M.

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Many of the home loans made during the housing boom were intentionally structured to avoid private mortgage insurance, which protects the lender in the event you run into trouble.

As housing prices soared, lenders were willing to take on lots of risk. They made "piggyback" second loans that allowed consumers to make small down payments, or avoid them entirely. Such loans were even given out to borrowers with poor credit scores and people who didn't provide proof of their incomes.

By 2006, only about 9 percent of mortgages involved PMI, down from about 16 percent in 2000, according to Inside Mortgage Finance, a trade publication. Since then, defaults have skyrocketed.

Still, the mortgage insurance industry hasn't escaped the pain. PMI Group Inc., one of the industry's biggest players, lost nearly $1.9 billion in 2007 and 2008 combined. As more mortgages go bad, insurers are forced to cover interest and principal payments. Plus, new business has declined because mortgage lenders have severely restricted the availability of new loans to borrowers who don't have 20 percent down payments and good credit.