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mortgage default insurance premium

How is the housing bubble in the US able to cause an entire global meltdown?
Think about it — doesn’t make sense. Sure the US would have problems, but those subprime loans made by borrowers that didn’t have money to make the payments also had mortgage insurance premium paid when they bought the home. That means if the borrower defaulted on his loan then the mortgage insurer would give the bank the money for the loan. AIG has already been bailed out due to the amount of foreclosures.
Global Banks
Mortgage Default Insurance