That’s not theft. That is a voluntary market, without such loans being made otherwise being viable elsewhere—or they would have been made elsewhere.
There are significant frictional, management, legal and market costs with taking over such marginal loans that are often underwater to start with.
Again, such loans probably shouldn’t be made to begin with, and the borrower ought to wait until he/she has a sufficient down payment. But if banks are going to make those loans, the rest of us who rely upon our financial system being sound ought to be glad they require PMI for coverage.
PMI is a scam rip off. Period!