CHCP Insurance & Liability Considerations 5

Question 1

Which party typically pays for the lender's title insurance policy in a standard US residential transaction?

Accepted Answer

The buyer, as a condition of obtaining the mortgage loan

Answer

In most US markets, the buyer pays for the lender's title insurance policy as part of the closing costs required to obtain the mortgage.

Question 2

What is the purpose of a 'closing protection letter' (CPL) issued by a title underwriter?

Accepted Answer

To protect lenders and buyers from closing agent fraud or negligence when handling closing funds and documents

Answer

A CPL extends the title underwriter's protection to cover losses caused by the acts or omissions of the closing agent in handling closing funds and documents.

Question 3

An HOA has an unpaid assessment lien on a condominium unit being sold. How does this typically affect closing?

Accepted Answer

The lien must be paid at or before closing to transfer clear title

Answer

HOA assessment liens attach to the property and must be satisfied at closing to prevent the new owner from inheriting the debt.

Question 4

What is 'title insurance binder' (also called a commitment)?

Accepted Answer

A preliminary document committing the title company to issue a policy subject to listed conditions and exceptions

Answer

A title commitment or binder is the title company's promise to issue a final policy once specified requirements are met and closing occurs.

Question 5

Which scenario would typically trigger a claim under a buyer's homeowner's insurance policy rather than their title insurance policy?

Accepted Answer

A roof damaged by a hailstorm six months after closing

Answer

Homeowner's insurance covers physical perils like hail damage occurring after closing, while title insurance covers pre-existing title defects.

(CHCP) Certified Home Closing Professional Practice Test

(CHCP) Certified Home Closing Professional Practice Test

CHCP Insurance & Liability Considerations 5