What ensures a lender's financial security if a borrower defaults?

Mortgage insurance serves as a protective measure for lenders in the event that a borrower defaults on their loan. When a borrower is unable to make their mortgage payments, mortgage insurance helps to cover the financial loss that the lender might incur. This insurance typically comes into play especially in situations where the borrower makes a smaller down payment, often under 20% of the home’s value. In such cases, lenders require mortgage insurance to mitigate their risk.

In the context of ensuring financial security, mortgage insurance adds a layer of assurance to the lender that they will recover some, if not all, of their investment if the borrower fails to meet their payment obligations. This assurance encourages lenders to extend financing, even to borrowers who might otherwise be viewed as higher risk due to minimal equity in the property.

The other options focus on different aspects of real estate financing. Property appraisals assess the value of a home but do not directly protect lenders from default. Leverage pertains to the use of borrowed funds to increase potential returns, which does not address the security issue in a default scenario. Investment yield relates to the returns from an investment, but it also does not secure the lender's position during a borrower's default. Thus, mortgage insurance stands out as the correct answer regarding financial