Which of the following options best describes mortgage insurance?

Mortgage insurance serves the purpose of protecting lenders in the event that a borrower defaults on their loan. When a borrower is unable to meet their mortgage payment obligations, the lender faces the risk of loss. Mortgage insurance provides a financial safeguard for the lender, compensating them for a portion of the losses incurred due to default. This is particularly relevant in scenarios where the down payment is lower than 20% of the home's value, as the risk to lenders increases. Consequently, mortgage insurance enables lenders to offer loans to borrowers who may have less equity in their homes and may not otherwise qualify for financing.

The other options do not accurately represent the primary function of mortgage insurance. While there may be elements that relate to borrower protection or safety nets, the specific role of mortgage insurance is primarily centered around providing lenders with coverage against losses from borrower defaults. By understanding this distinction, it's clear why the correct description emphasizes the protection of lenders.