 Both of these methods compensate the lender as if they were charging interest, but the loans are structured in a way that in name they are not, and the lender shares the financial risks involved in the transaction with the homebuyer.Mortgage insurance is an insurance policy designed to protect the mortgagee (lender) from any default by the mortgagor (borrower).It is used commonly in loans with a loan-to-value ratio over 80%, and employed in the event of foreclosure and repossession.