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NEW YORK (AP) - Private mortgage insurance is making a comeback. Until six or eight months ago, private mortgage insurance was out of favor as people eager to get into the roaring housing market took adjustable-rate mortgages or "piggyback" loans or some other exotic form of financing.
But as the market has cooled and lenders have tightened their standards, many people who want homes — especially first-time home buyers and those with little money for down payments — are choosing traditional fixed-rate mortgages backed by private mortgage insurance, or PMI.
The insurance costs the borrower a monthly fee, typically a set percentage of the total mortgage loan. If for some reason the borrower can't repay the loan, the insurance kicks in and the lender gets some of its money back. Because of the guarantee, lenders are more willing to write the mortgages.
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