When a buyer makes less than a 20 percent down payment the lender requires private mortgage insurance) for the loan. The monthly payment is increased to include a premium -- which the buyer pays -- to purchase insurance for the lender's benefit, to pay off the loan in the event of a default on the loan. The lender collects the PMI premium directly with the monthly payment.
So what happened to the PMI? What did the lenders do with the PMI premiums? If they turned over the premiums to pay for the insurance, why haven't they filed for their payoff when these loans defaulted? Did they ever actually turn them over to pay for the insurance - or did they just pocket the extra $40 to $80 per month (based on a less than $100,000 loan)?
WHY are banks and Fannie and Freddie going belly up when they have been collecting premiums to pay for insurance to protect themselves in the event of loan defaults -- and leaving us holding this portion of the $700 billion bailout bag?
Someone should ask McCain this question, since he claims to know all the answers.