Lenders mortgage insurance is insurance through the lender to protect the lender's assets. This differs from the private mortgage insurance in that the homeowner is basically working with the same company, rather than two. In many states this is accomplished by charging a slightly higher interest rate on the complete loan, thereby building in the insurance and requiring no down payment for the insurance.
One benefit to mortgage insurance is that home buyers can hold back on the cash required for a downpayment and use that for improvements, upgrades or moving expenses which works out to a lower interest rate than a loan to cover the same costs would be.
Private or lenders mortgage insurance can help middle income families into homes that would be cost prohibitive because of the 20-25% down payment required without the insurance. This can be both a benefit and a problems as homeowners may be able to purchase a house that is more than they can actually afford to maintain and keep.
