CMPS CMPS Mortgage Insurance and Protection Products Questions and Answers

Question 1

What is Private Mortgage Insurance (PMI) and when is it typically required on a conventional loan?

Accepted Answer

Lender-protecting insurance required when the borrower's LTV exceeds 80% (down payment less than 20%)

Answer

PMI is insurance that protects the lender against borrower default when the loan-to-value ratio exceeds 80%, typically triggered by a down payment of less than 20%.

Question 2

Under the Homeowners Protection Act (HPA), at what LTV threshold must a lender automatically cancel PMI on a conventional loan?

Accepted Answer

78% LTV based on original value and original amortization schedule

Answer

The HPA requires automatic PMI cancellation when the loan balance reaches 78% of the original property value based on the scheduled amortization, provided the borrower is current on payments.

Question 3

What is 'lender-paid PMI' (LPMI) and what is its main trade-off compared to borrower-paid PMI?

Accepted Answer

The lender pays the PMI premium but charges a higher interest rate, which cannot be cancelled like BPMI

Answer

With LPMI, the lender covers the PMI premium in exchange for a slightly higher interest rate, and since there is no separate PMI policy, cancellation is not possible — the rate remains elevated for the life of the loan.

Question 4

FHA loans require a Mortgage Insurance Premium (MIP). What is the current upfront MIP percentage for most FHA purchase loans?

Accepted Answer

1.75%

Answer

FHA charges an upfront MIP of 1.75% of the base loan amount, which can be paid at closing or rolled into the loan balance.

Question 5

For FHA loans originated after June 3, 2013, with a down payment of less than 10%, when does the annual MIP cancel?

Accepted Answer

MIP does not cancel — it remains for the life of the loan

Answer

For FHA loans originated after June 3, 2013, with less than 10% down, the annual MIP is permanent and cannot be cancelled regardless of equity.

(CMPS) Certified Mortgage Planning Specialist Practice Test

(CMPS) Certified Mortgage Planning Specialist Practice Test

CMPS CMPS Mortgage Insurance and Protection Products Questions and Answers