Finance
What is the purpose of 'private mortgage insurance' (PMI) in Rhode Island residential lending?
AIt protects the buyer if the property value falls
BIt protects the lender if the borrower defaults on a low-down-payment loan✓ Correct
CIt insures the title against defects
DIt covers flood damage to the property
Explanation
PMI protects the lender (not the borrower) against losses if the borrower defaults. It is typically required when the borrower makes a down payment of less than 20% and the loan-to-value ratio exceeds 80%.
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