[Kansas58]

The mortgages would have been marketed without the insurance. There is NO requirement that the CDO’s and other mortgage backed securities have insurance on the underlying mortgages.
Not all mortgages are insured.

This problem, ALL of this problem, was caused by the Democrat Party insisting that everyone with a pulse deserved a mortgage.

This injected risk into the system.

Insurance was used as a way to manage risk, however the risk was simply too great to manage.

Go to the SOURCE: Mortgage Origination!

[Rockingham]

The key to the scope of the current financial crisis is not the bad mortgages, but that those mortgages were packaged and then sold again as securities. The proceeds from this transaction went back into the hands of mortgage financiers and back into the mortgage market.

Why would, for example, a European bank buy a security based on mortgages in the US, a market they knew little about? Simple: the payments promised by the security were insured by AIG. Without such insurance, those mortgage backed securities would not have been marketable and the US loan bubble would have deflated early on.