You have just identified a hole in the market providing an opportunity. Why don't you start a business providing mortgages to those who don't want to buy insurance or can't get it.
You say you don't personally want to carry paper on an uninsured property? Maybe that's the free market talking after all!
get real, try and be a licensed lender without requiring the insurance, you can't.
Regulators would shut you down so don't say it is actually a free issue when the regulatory realities say otherwise.