CRU CRU Insurance & Title Requirements 2 — Questions and Answers
Question 1: What is the purpose of an ALTA/NSPS Land Title Survey in residential lending?
- To determine the property's market value
- To identify the boundaries, improvements, encroachments, and easements of the property (Correct answer)
- To certify the property's flood zone designation
- To assess the condition of the roof and foundation
Correct answer: To identify the boundaries, improvements, encroachments, and easements of the property
An ALTA/NSPS survey provides a detailed map of the property showing legal boundaries, structures, encroachments, and easements relevant to title insurance.
Question 2: Private Mortgage Insurance (PMI) is typically required on conventional loans when the LTV exceeds what threshold?
- 70%
- 80% (Correct answer)
- 90%
- 95%
Correct answer: 80%
Conventional lenders require PMI when the down payment is less than 20%, meaning the LTV exceeds 80%, to protect against borrower default.
Question 3: Under the Homeowners Protection Act (HPA), when must a lender automatically cancel borrower-paid PMI on a residential mortgage?
- When the loan balance reaches 80% of the original appraised value
- When the loan balance reaches 78% of the original purchase price or appraised value (whichever is lower), based on scheduled payments (Correct answer)
- After the borrower has made 24 consecutive on-time payments
- Only upon written borrower request
Correct answer: When the loan balance reaches 78% of the original purchase price or appraised value (whichever is lower), based on scheduled payments
The HPA requires automatic PMI cancellation when the principal balance reaches 78% of the original value based on the amortization schedule, provided the borrower is current.
Question 4: What is an easement appurtenant in the context of a property's title?
- A personal right granted to a specific individual that does not transfer with the land
- A right benefiting an adjacent parcel that runs with the land and transfers automatically with ownership (Correct answer)
- A court-ordered lien for unpaid property taxes
- A deed restriction limiting the property's use
Correct answer: A right benefiting an adjacent parcel that runs with the land and transfers automatically with ownership
An easement appurtenant benefits a dominant estate (neighboring parcel) and automatically transfers when either parcel is sold, binding future owners.
Question 5: Which title condition would typically cause a residential underwriter to decline or condition a loan approval?
- A utility easement in the rear yard
- An unresolved mechanic's lien from a contractor who worked on the property (Correct answer)
- A recorded CC&R from the subdivision developer
- A deed restriction limiting the home to residential use
Correct answer: An unresolved mechanic's lien from a contractor who worked on the property
An unresolved mechanic's lien is a financial encumbrance that clouds the title and could give the lienholder priority over the new lender's mortgage.
Question 6: What is the role of a title commitment (also called a preliminary title report) in the mortgage closing process?
- It serves as the final title insurance policy
- It discloses existing liens, encumbrances, and conditions that must be cleared before the title company will issue a policy (Correct answer)
- It replaces the need for a property survey
- It certifies the borrower's creditworthiness
Correct answer: It discloses existing liens, encumbrances, and conditions that must be cleared before the title company will issue a policy
A title commitment outlines what the insurer will cover and what exceptions or requirements must be resolved before issuing the final policy.
CRU CRU Insurance & Title Requirements 2
What is the purpose of an ALTA/NSPS Land Title Survey in residential lending?