Mortgage Insurance Protects Lenders When a Borrower Defaults by Making

Mortgage insurance protects lenders when a borrower defaults by making up any shortfall needed to repay the loan if the sale of the property doesn't cover the debt. Federally regulated lenders must have mortgage insurance on loans where the buyer's down payment is less than 20 percent of the price. Why is this 20 percent threshold efficient for the insurance company?

A) Information about an individual's mortgage repayment risk is valuable to the insurance company, and the insurance company has found that all individuals fall into this 20 percent threshold.
B) Information about an individual's mortgage repayment risk is valuable to the insurance company, but there diminishing marginal cost in obtaining very specific information.
C) Information about an individual's mortgage repayment risk is valuable to the insurance company, and the insurance company has found that this 20 percent threshold is perfectly efficient.
D) Information about an individual's mortgage repayment risk is valuable to the insurance company, but there diminishing marginal benefit in obtaining very specific information.