Finance
A Mississippi homebuyer obtains a conventional loan with a 95% LTV. The lender requires PMI. The primary purpose of PMI is to protect:
AThe borrower from losing their home
BThe lender against losses if the borrower defaults and the foreclosure sale proceeds are insufficient to cover the loan balance✓ Correct
CThe title company against claims
DThe borrower's equity investment
Explanation
PMI (private mortgage insurance) protects the lender, not the borrower. High-LTV loans have less equity cushion, so if the borrower defaults, foreclosure proceeds may not cover the full loan balance. PMI reimburses the lender for losses on the high-risk portion of the loan.
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