If homeowners have been dutifully paying mortgage insurance all these years, shouldn't the mortgage industry be covered in case of disaster? Like now?

Not so much, say industry professionals, who helped me sort out this strange conundrum. It's strange because private mortgage insurance, or PMI, can be a large chunk of change for many of us.

But it tends to be required if you don't put at least 20 percent down on your mortgage and that's a difficult nut to crack with the average home price being well over $200,000.

You, the Good Citizen homeowner, get nothing for your payment, except the privilege of borrowing money. It's all for the lender, who is supposed to be protected in case you go into foreclosure.

Fair warning: If you have been paying PMI like the good homeowner you are, you may feel like a chump if you keep reading.

The fact is, some homeowners don't pay mortgage insurance, and now they are getting foreclosed on, leaving the whole tab to us. And even those foreclosures that were backed by insurance are leaving their lenders with a big bill.

Let's start with the better citizens, the ones who paid for mortgage insurance and still lost their homes.

Mortgage insurance doesn't even come close to covering the entire cost of a mortgage. Instead it covers "anywhere between 20 and 40 percent of a mortgage loan," said Jeff Lubar of the Mortgage Insurance Companies of America. "The coverage is designed to cover the lender's cost of marketing and selling a foreclosed property."

That leaves a lot of unpaid bills by the time the lending company eats the lost monthly payments and pays for home repairs as well as the legal bills to get the owner evicted, and so on.

As for the home buyers who have not been paying any mortgage insurance -- it started with piggyback loans, a playful term for getting one loan to make the required 20 percent down payment, and another loan to pay the mortgage.

These buyers didn't start out intending to default on their loans, and likely figured they were being clever at saving money. However, such buyers have no proverbial "skin in the game." They have nothing to lose and if things don't work out, they can walk away from both loans without losing any of their own cash.

"Even though people were buying with no money down, many did not have any PMI," said Greg McBride, senior financial analyst with Bankrate. "That became a cause for severe lender distress. Not only are [the homeowners] not making payments on either loan, but the second lien becomes almost a complete write-off."

In other words, the company that made the smaller piggyback loan gets taken to the slaughter.

In addition, most subprime and Alt-A loans were not sold to Fannie Mae or Freddie Mac, which have conventional lending requirements, said David Crowe, chief economist at the National Association of Home Builders. "So they did not have mortgage insurance and hence the ultimate investor is unprotected."

Did you ever have a teacher who would write the classroom rules on the board and then proceed to ignore them? Before long, the class was chaos. The kids had no consequences and before long, they were bouncing off the walls.

I'm seeing some similarities here.

Decades ago, when home buyers started taking out mortgages to buy homes, there were rules and laws and guidelines for lending.

In the past 10 years or so, those rules have become so much chalk dust. Now, too late, the process is out of control, like a classroom full of rowdy 9-year-olds.

Kay Severinsen is editor of SearchChicago-Homes.