Finance
What is the purpose of private mortgage insurance (PMI)?
AIt protects the buyer if the home loses value
BIt protects the lender if the borrower defaults on a high-LTV loan✓ Correct
CIt covers the cost of homeowner's insurance
DIt guarantees the seller will receive the full purchase price
Explanation
PMI protects the lender (not the borrower) against loss if a borrower defaults on a conventional loan with less than 20% down payment. PMI allows lenders to offer loans with higher LTV ratios while managing their risk.
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