Finance
In Texas, what is the primary purpose of private mortgage insurance (PMI)?
ATo protect the borrower from job loss
BTo protect the lender against loss if the borrower defaults on a conventional loan with less than 20% down✓ Correct
CTo insure the property against fire and casualty
DTo protect the title company
Explanation
PMI protects the lender (not the borrower) against losses if the borrower defaults on a conventional mortgage when the down payment is less than 20% (LTV > 80%). The Homeowners Protection Act requires lenders to cancel PMI when the LTV reaches 80% based on original value.
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