Finance
Louisiana's 'Homeowners Choice' program (a state-backed insurance option) was created because:
AFederal law required state backup insurance programs
BAfter Hurricanes Katrina and Rita, many private insurers withdrew from Louisiana, leaving the Citizens Property Insurance Corporation as the primary insurer, creating a need for alternatives✓ Correct
CHomeowners demanded lower insurance rates
DThe LREC required insurance for all licensed properties
Explanation
After Hurricanes Katrina and Rita devastated Louisiana in 2005, many private insurers stopped writing policies in Louisiana, leading to massive increases in Citizens (insurer of last resort) exposure. Louisiana created alternative programs to attract private insurers back to the market.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
State-Specific Concepts
DRE Regulation
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