How does mortgage insurance benefit lenders?

How does mortgage insurance benefit lenders?

• A. Increases Loan Amounts
• B. Provides borrower financial assistance
• C. Indemnifies against borrower default
• D. Shortens loan approval times

Answer: (C)

Mortgage insurance primarily benefits lenders by providing a safety net in the event that the borrower defaults on the loan. When a borrower defaults, the lender faces the risk of losing the money they have lent; mortgage insurance mitigates this risk by compensating the lender for a portion of the loss incurred due to the borrower's failure to repay the loan. This assurance can encourage lenders to offer loans to borrowers who may have lower credit scores or who may not be able to make a significant down payment, thus expanding access to homeownership. The other options do not directly reflect how mortgage insurance serves lenders. Increasing loan amounts might be a consequence of the lender's willingness to take on more risk, but it's not a direct benefit of mortgage insurance. Providing borrower financial assistance relates more to the help borrowers receive rather than a benefit to the lender. Shortening loan approval times is not a function of mortgage insurance; rather, it pertains to the overall efficiency of the lender’s processing procedures.

Mortgage insurance primarily benefits lenders by providing a safety net in the event that the borrower defaults on the loan. When a borrower defaults, the lender faces the risk of losing the money they have lent; mortgage insurance mitigates this risk by compensating the lender for a portion of the loss incurred due to the borrower's failure to repay the loan. This assurance can encourage lenders to offer loans to borrowers who may have lower credit scores or who may not be able to make a significant down payment, thus expanding access to homeownership.

The other options do not directly reflect how mortgage insurance serves lenders. Increasing loan amounts might be a consequence of the lender's willingness to take on more risk, but it's not a direct benefit of mortgage insurance. Providing borrower financial assistance relates more to the help borrowers receive rather than a benefit to the lender. Shortening loan approval times is not a function of mortgage insurance; rather, it pertains to the overall efficiency of the lender’s processing procedures.