What is private mortgage insurance supposed to insure?

It was my understanding it was meant to insure against the buyer’s default. If so, then obviously a buyer still suffers the consequences if he doesn’t pay the mortgage, but wouldn’t the lending bank still remain healthy?

I’m only asking, because PMI seems to serve no purpose in this shaky market. It seems like having an insurance company that doesn’t cover the only situation it’s meant to cover.

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