CRU Insurance & Title Requirements Flashcards

What is the minimum required hazard insurance coverage amount for a conventional residential mortgage?

Answer: At least 100% of the insurable replacement cost of the improvements

Conventional guidelines require hazard insurance to cover at least the full replacement cost of the improvements to ensure the lender's collateral can be rebuilt.

Which federal program provides flood insurance to property owners in participating communities?

Answer: National Flood Insurance Program (NFIP)

The NFIP, administered by FEMA, offers federally backed flood insurance to homeowners in communities that adopt floodplain management ordinances.

Under the Flood Disaster Protection Act, when is a lender required to mandate flood insurance on a residential property?

Answer: When the property is in a Special Flood Hazard Area (SFHA) and the community participates in the NFIP

Federal law requires lenders to mandate NFIP flood insurance for loans on properties located in SFHAs in NFIP-participating communities.

What does a lender's title insurance policy protect?

Answer: The lender's security interest against prior title defects, liens, or encumbrances not disclosed in public records

A lender's title policy indemnifies the lender for losses from undiscovered title defects up to the loan amount.

What is a 'mortgagee clause' (also called 'loss payee clause') in a homeowner's insurance policy?

Answer: A provision naming the lender as a co-insured to receive claims proceeds to the extent of its interest

The mortgagee clause protects the lender by ensuring that insurance proceeds are paid to the lender (to the extent of its mortgage balance) in the event of a covered loss.

Which type of title search examines recorded instruments for a specified number of years back from the present?

Answer: Chain of title search

A chain of title search traces ownership and encumbrances through recorded instruments over a defined period to establish a clear ownership history.