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Mortgage Finance > Mortgage > Mortgage Insurance
Mortgage Insurance
Mortgage insurance refers to an insurance policy that guarantees repayment of a mortgage loan in the event of death or, possibly, disability of the mortgagor. It can also refer to protection for the lender in the event of default, usually covering a portion of the amount borrowed.
Private Mortgage Insurance (PMI) is default insurance on conventional loans, provided by private insurance companies. The Homeowners Protection Act of 1998 allows PMI to be canceled when the amount owed reaches a certain level, particularly when the debt is less than 80 percent of the home's value, and automatically when the loan principal is less than 78 percent of its original cost.
If you put less than 20 percent down on a home mortgage, lenders often require you to have Private Mortgage Insurance (PMI). PMI protects the lender if you default on the loan. The Homeowners Protection Act of 1998 - which became effective in 1999 - establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI.
Mortgagee's Title Insurance is a policy that protects the lender from future claims to ownership of the mortgaged property. Generally required by the lender as a condition of making a mortgage. In the event of a successful ownership claim from someone other than the mortgagor, the insurance company compensates the lender for any consequent loses. Mortgagor's Title Insurance is a policy protecting the buyer/ owner of real property from successful claims of ownership interest to the property. The coverage usually is supplemental to a Mortgagee's Title Insurance policy, and the premium is customarily paid by the buyer.
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