They then would be converted into low-interest loans insured by the Federal Housing Administration.

CNN: Housing

In the case of insured bonds, where the interest payment is funded by a bond insurer or letter of credit issuer, the default is still the same.

FORBES: Even If A Bond Doesn't Default, You Can Still Lose Your Money

Under the plan, the government would buy up bad mortgage loans, converting them into low-interest, FHA-insured loans.

CNN: McCain faces conservative backlash over mortgage plan

On the first, Harald Benink of Maastricht University and George Benston of Emory University told the conference that deposit guarantees should be explicitly confined to accounts paying a relatively low rate of interest, and that these insured deposits should be more than fully backed by safe liquid assets (such as treasury bills and commercial paper).

ECONOMIST: Economics focus

There is the added situation that many such insured defaults are staged to allow the issuer to accelerate the bonds and refund them at a lower interest rate.

FORBES: Even If A Bond Doesn't Default, You Can Still Lose Your Money