CRU CRU Insurance & Title Requirements

Question 1

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

Accepted Answer

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

Answer

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.

Question 2

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

Accepted Answer

National Flood Insurance Program (NFIP)

Answer

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

Question 3

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

Accepted Answer

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

Answer

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

Question 4

What does a lender's title insurance policy protect?

Accepted Answer

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

Answer

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

Question 5

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

Accepted Answer

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

Answer

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.

(CRU) Certified Residential Underwriter Practice Test

(CRU) Certified Residential Underwriter Practice Test

CRU CRU Insurance & Title Requirements