Private
mortgage insurance is a type of insurance that helps protect the
mortgage company against losses due to foreclosure. This protection is
provided by private mortgage insurance companies and allows mortgage
companies to accept lower down payments than would normally be allowed.
Private
mortgage insurance also enables mortgage companies to grant loans that
would otherwise be considered too risky to be purchased by third party
investors like the Federal National Mortgage Association (FNMA) and the
Federal Home Loan Mortgage Corporation (FHLMC). The ability to sell
loans to these investors is critical to maintaining mortgage market
liquidity, which in turn, allows mortgage companies to continue
originating new loans.
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