Private Mortgage Insurance Makes A Comeback

Private mortgage insurance is slowly starting to creep back into large home loans, adding a new fee for some wealthy borrowers.

Traditionally, this insurance is sold to buyers who make small down payments, typically less than 20%, and is designed to protect lenders if a borrower defaults. The policies were widely used during the housing boom, but insurers scaled back amid rising foreclosures. Demand for the product plummeted when banks ended low down-payment programs for most borrowers.

But now, as home values are rising and banks are experimenting with looser lending standards, private insurers are preparing a comeback. They are especially interested in private jumbo loans, which exceed $417,000 in most of the country and $625,500 in pricier markets. To appeal to wealthy borrowers, insurers are lowering costs and increasing the size of mortgages they will cover.f

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