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Does mortgage insurance protect the bank's interest on a foreclosed loan?

Kevin Sutter

in Student Loans

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Ralph Lopez on January 9, 2019

Mortgage insurance protects the lender against loss, subject to the contractual limitations between the bank and the mortgage insurer, if the borrower does not pay back the loan. A bank that is obligated to foreclose on a property due to a breach of the borrower is still at risk of losing the money, because the mortgage insurer covers only a certain percentage of the original amount of the loan, typically 20% to 50%. Mortgage insurance to mitigate the losses suffered by a bank due to a foreclosure, but does not fully protect the bank from losses.


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