Which of the following terms refers to the protection a lender requires from borrowers with lower down payments?

Private mortgage insurance (PMI) is a specific type of insurance that protects lenders in the event a borrower defaults on their mortgage loan. It is typically required when a borrower makes a down payment that is less than 20% of the home's purchase price. This insurance mitigates the lender's risk, as it ensures that they can recover some of their losses if the borrower fails to repay the loan.

The need for PMI arises from the fact that lower down payments indicate a higher risk for lenders. By requiring PMI, lenders can offer loans to borrowers who might otherwise not qualify for conventional financing, allowing more individuals to become homeowners despite having less initial capital for a down payment. This insurance is usually added to the borrower's monthly mortgage payment and can be canceled once the borrower reaches a certain equity threshold in the home.

Understanding the role of PMI is crucial for both lenders and borrowers, as it plays a significant part in the home buying process for those with limited upfront funds. The other types of insurance mentioned do not serve the same function as PMI. Homeowners insurance protects against damages to the property itself, liability insurance covers legal liabilities, and property insurance refers to various coverages for property loss, but none specifically mitigate the lender's risk associated with lower down payments