Mortgage insurance primarily protects whom?

Mortgage insurance primarily protects the lender. This insurance is typically required when a borrower does not make a sizable down payment on a home, often less than 20% of the purchase price. The purpose of mortgage insurance is to mitigate the risk for lenders in case the borrower defaults on the loan.

In the event of default, the mortgage insurance will cover a portion of the lender's losses. This protection allows lenders to offer loans to borrowers who may not have the substantial upfront capital typically required, thus enabling more individuals to purchase homes.

Other options do not accurately describe the primary beneficiary of mortgage insurance. For example, while borrowers may benefit indirectly from the availability of loans that require less down payment, they are not the primary party that mortgage insurance protects. Similarly, the insurer and the government do not receive the primary protection; rather, their roles vary in the context of the mortgage market, with the insurer being a provider of the coverage and the government potentially backing certain programs but not being directly protected by individual mortgage insurance policies.