CMP - Certified Mortgage Processor Appraisal and Title Review Questions and Answers

Question 1

When reviewing a preliminary title report, a mortgage processor discovers a mechanic's lien on the property. Which of the following is the most appropriate next step?

Accepted Answer

Communicate the finding to the loan officer and request evidence of the lien being satisfied before closing.

Answer

Discovering a lien on the title report is a critical finding. The processor's duty is to communicate this to the loan officer so that a condition can be set for the seller to clear the lien and provide proof of satisfaction (a 'lien release') before the loan can close. Ignoring it or assuming it will be handled can jeopardize the lender's lien position.

Question 2

A Closing Protection Letter (CPL) is issued by the title insurance underwriter primarily to protect which party against misconduct by the closing agent?

Accepted Answer

The lender and sometimes the borrower

Answer

A Closing Protection Letter indemnifies the lender (and in some cases, the borrower) against actual losses caused by the closing agent's fraud, dishonesty, or failure to follow written closing instructions. It does not protect the seller, real estate agents, or appraiser.

Question 3

An appraiser is determining the value of a single-family residence for a conventional purchase loan. The most common and preferred appraisal report form used for this purpose is the:

Accepted Answer

Uniform Residential Appraisal Report (URAR Form 1004)

Answer

The Uniform Residential Appraisal Report (URAR), also known as Fannie Mae Form 1004, is the standard and most common form used for appraising single-family homes for mortgage lending purposes. A BPO is an opinion of value from a real estate agent, not an appraisal. A Restricted Report is for limited use, and a Narrative Report is typically for complex commercial properties.

Question 4

Which of the following items is a critical point of comparison between the appraisal report and the loan application for a mortgage processor?

Accepted Answer

The seller's name and the property address

Answer

A mortgage processor must verify that key details are consistent across all documents. This includes ensuring the seller's name on the appraisal matches the owner of public record and the purchase contract, and that the property address is identical on the appraisal, application, and title report to ensure the correct property is being financed and appraised.

Question 5

A borrower is purchasing a home and the lender requires title insurance. What is the primary purpose of the lender's title insurance policy?

Accepted Answer

To protect the lender's financial interest against past title defects.

Answer

A lender's title insurance policy protects the lender's investment in the property from financial loss due to unknown title defects that existed before the policy was issued, such as undisclosed heirs, liens, or forgeries. It does not protect the borrower's equity (that's an owner's policy) or cover future events (that's homeowner's insurance).

CMP - Certified Mortgage Processor Practice Test

CMP - Certified Mortgage Processor Practice Test

CMP - Certified Mortgage Processor Appraisal and Title Review Questions and Answers