What is the purpose of mortgage insurance?

Mortgage insurance is designed primarily to protect the lender in the event that the borrower defaults on the loan. This form of insurance reduces the financial risk faced by lenders when they issue loans with low down payments, as it compensates them for any losses resulting from foreclosure. When a borrower defaults and the property is sold, the insurer reimburses the lender for part of the unpaid loan balance, thus helping to ensure the lender's financial stability.

The other choices do not align with the primary function of mortgage insurance. Protecting the borrower in the case of job loss involves other forms of insurance, such as unemployment insurance, rather than mortgage insurance. Guarantees regarding property titles pertain to title insurance, which is unrelated to mortgage insurance. Lastly, while mortgage interest may be tax-deductible, mortgage insurance itself does not provide tax benefits directly to the borrower; it's primarily for risk mitigation on the lender's side.