What is the purpose of PMI (private mortgage insurance?)?

I have a question. All conventional mortgage loans where the buyer has put down less then 20% as a downpayment are required to purchase PMI (Private Mortgage Insurance) which is supposed to "protect" the lender against any losses should the borrower default. In the case of an FHA loan, these are insured by the... show more I have a question. All conventional mortgage loans where the buyer has put down less then 20% as a downpayment are required to purchase PMI (Private Mortgage Insurance) which is supposed to "protect" the lender against any losses should the borrower default. In the case of an FHA loan, these are insured by the Federal Government. Given this why aren't the lending instituitions collecting their losses from the insurance companies? Is the government not backing the FHA loans? Please help me understand why buyers must have the PMI but now the lenders are asking us for help???
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