"Coverage" Column on PMI Chart

[Account Closed]

I am curious about what the coverage (and I've also seen an exposure column in P.M.I. charts as well) column denotes on this P.M.I. chart; can someone help me understand what's being referenced there?

[Stephanie Medellin]

@Account Closed

The link didn't go directly to a chart, but I think I know what you're referring to.  The coverage amount is the percentage of the loan amount that will be covered by mortgage insurance in the event that you default and cannot repay your loan.  

They do this because there is always a chance the property value could go down, or that they will have to sell at a loss after foreclosure. Think about it - if someone is having trouble making payments they are most likely neglecting the property too. If they have to foreclose on a property with a $100,000 loan and can only recoup $60,000, but there was 30% coverage, the lender will only take a $10,000 loss instead of a $40,000 loss. The mortgage insurance company will cover the other $30,000 (30%). The higher the LTV, the higher the coverage that's required by lenders.