What is the exam-ready distinction?
| Official syllabus topic | Financing: Mortgage Insurance; Conventional and FHA Loans |
|---|---|
| Official PSI area | Financing |
| Published weight | 10% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Private mortgage insurance | FHA mortgage insurance |
|---|---|---|
| Loan family | Conventional loan | FHA-insured loan |
| Provider | Private mortgage insurer | Federal Housing Administration insurance program |
| Who is protected | Lender or covered investor against borrower default loss | Approved lender against covered default loss |
| Ending coverage | HPA and contract cancellation or termination rules can apply | Duration follows current FHA rules, original LTV, term, and endorsement conditions |
Decision rule
Georgia-specific distinction
Worked example
Scenario. A borrower has a covered conventional first mortgage with borrower-paid PMI and asks whether federal cancellation rules may apply.
Reason it through. The Homeowners Protection Act addresses qualifying borrower-paid PMI on covered residential mortgages. FHA MIP follows a different program framework.
Answer. Analyze the HPA and loan terms rather than applying FHA MIP duration rules.
Common exam traps
- Calling all mortgage insurance PMI
- Saying insurance protects the borrower
- Using one cancellation threshold for every product
- Claiming FHA annual MIP always lasts for one universal period
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A borrower has a conventional first mortgage with borrower-paid private mortgage insurance and asks whether the coverage can ever end. Which rules apply?
- A. FHA rules on how long annual premiums continue
- B. Georgia security deed law, since a security deed secures the loan
- C. No rules, since private coverage lasts for the full loan term
- D. The Homeowners Protection Act and the loan's terms
Show answer and explanation →
Answer: D. The Homeowners Protection Act and the loan's terms
The Homeowners Protection Act gives cancellation and termination rights for qualifying borrower-paid PMI on covered loans, alongside the loan's own terms. FHA premium rules are the wrong choice, but they apply to FHA-insured loans, not conventional ones. The Georgia security deed does not change the federal or contractual insurance rules.
Question 2Who does mortgage insurance on a home loan mainly protect?
- A. The lender or investor against loss if the borrower defaults
- B. The borrower's down payment if market values fall
- C. The borrower's family if the borrower dies before payoff
- D. The buyer against defects in the title to the property
Show answer and explanation →
Answer: A. The lender or investor against loss if the borrower defaults
PMI and FHA mortgage insurance both protect the lender, investor, or insurance fund against loss from borrower default. The borrower pays for it but is not the protected party. Protecting the borrower's equity is the common misconception, and payoff at death describes mortgage life insurance, a different product.
Question 3A buyer finances a home with an FHA-insured loan. What mortgage insurance charges should the buyer expect?
- A. Private mortgage insurance from a private insurer
- B. Upfront and annual premiums under FHA program rules
- C. PMI that ends under the Homeowners Protection Act
- D. No premium, since the federal government insures the loan
Show answer and explanation →
Answer: B. Upfront and annual premiums under FHA program rules
FHA mortgage insurance includes an upfront premium and an annual premium set by the FHA program. PMI is private insurance tied to conventional loans, so calling FHA coverage PMI is the mistake. FHA insurance is funded by borrower premiums, so federal backing does not make it free.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Primary Versus Secondary Mortgage Market. Next, primary versus secondary mortgage market shows where a loan is made and where it is later sold, and the investors buying those loans are among the parties mortgage insurance protects.
Return to the complete exam-concept library or the Financing hub.