Your FHA mortgage insurance premiums go into a government fund run by HUD, and that fund pays the lender back when a loan goes bad. First, a housekeeping note: PMI means private mortgage insurance, and FHA's version is different. FHA mortgage insurance is a government insurance program. The upfront premium and the monthly premium both flow into HUD's Mutual Mortgage Insurance Fund. When a lender takes a loss through a short sale or foreclosure, it files a claim against that fund and gets reimbursed. The premiums you pay cover other borrowers' shortfalls, and their premiums would cover yours. The other programs run on the same pool-and-reimburse principle with different plumbing: - VA: no monthly or annual mortgage insurance at all. Instead the VA collects a one-time funding fee (waived for veterans receiving service-connected disability compensation, among other exemptions) that supports the loan guaranty program's loss reserves. - USDA: an upfront guarantee fee plus a smaller annual fee collected monthly, both funding USDA's own loss coverage. The annual fee runs for the life of the loan. The agencies set these fee amounts and adjust them over time, so confirm current figures. - Conventional and jumbo: the one place true PMI lives. The coverage comes from a private mortgage insurance company, and it reimburses a percentage of the lender's loss if the borrower defaults. Four programs, one idea: a pool that pays the lender's claim, just funded and administered differently.