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Mortgage Insurance

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Mortgage insurance is insurance covering the lender or other holder against non-payment of the mortgage loan by the borrower. The government can provide mortgage insurance, such as on an FHA or VA loan. Fannie Mae and Freddie Mac are also important providers of mortgage insurance. Private mortgage insurance, as opposed to government insurance, is often called PMI. The premiums for mortgage insurance are generally paid by the borrower as part of the monthly payment on the mortgage. Mortgage insurance is generally required before a mortgage loan can be added to a pool of loans for creation of a mortgage-backed security that can be sold to investors in the secondary mortgage market. Prior to the advent of mortgage insurance, far fewer families could qualify for a mortgage, and homeownership was much lower in the US than it is today.



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