What primary benefit does mortgage insurance provide to a lender?

Mortgage insurance serves as a critical safety net for lenders, primarily ensuring that they receive full repayment of the loan balance in the event that a borrower defaults. This type of insurance mitigates the financial risk associated with lending, particularly in cases where the borrower may have a lower down payment or weaker credit profile. By offering this security, mortgage insurance allows lenders to confidently issue loans they might otherwise perceive as too risky.

In the context of the other options, while lowering the interest rate, covering closing costs, and providing tax benefits may be relevant to borrowers, they do not directly address the lender's primary financial concern if the loan is not repaid. Therefore, the assurance of full repayment through mortgage insurance is paramount for lenders, reinforcing why this is the correct answer.