Borrowers, insurers would save with new mortgage insurance

Part 2: Fixing the housing finance system

(This is Part 2 of a five-part series. Read Part 1, "Lenders wise to beef up default-risk reserves.")

The first article in this series pointed to a serious weakness in the way the mortgage system deals with default risk. Interest-rate risk premiums collected from borrowers that are not needed to meet current losses are paid out as income to investors and not reserved to meet future losses.