MI generally applies to loans with loan-to-value (LTV) ratios higher than 70%. From this LTV level and higher, the probability of borrower default is considerably greater. MI can also be applied to loans with LTV ratios lower than 70%, according to the loan features and/or the goals defined by the lender.

This illustration shows how the risk level assumed by a lender can vary for the same 95% LTV loan when the loan includes the MI coverage:

Without MI, the lender assumes the entire risk associated with the loan (95%). However, when the lender includes MI coverage to the 70% LTV level, the actual exposure for the lender is reduced to 70%, with AIG United Guaranty holding the first-loss position for the remainder of the loan amount.