private mortgage insurance

private mortgage insurance (PMI)Protects lender against losses due to default on the loan.It gives no other protection;that is, it does not protect against legal threat to the lender's mortgage claim, nor does it protect against physical hazards. It indemnifies the lender, but not the borrower. Lenders generally require private mortgage insurance for conventional loans over 80 percent of the value of the security property. private mortgage insurance companies provide such insurance, which usually covers the top 20 percent of loans.in other words, if a borrower defaults and the property is foreclosed and sold for less than the amount of the loan, the PMI will reimburse the lender for a loss up to 20 percent of the loan amount. Thus, the net effect of PMI from the lender's perspective is to reduce default risk. this reduction of the default risk was sufficient to make LPMs a viable risk for lenders where they had never been before.