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

Insurance protecting the borrower from job loss; required on all conventional loans

Answer

Title insurance required at closing on all purchase loans

Answer

Homeowner's insurance required by all lenders

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

85% LTV

Answer

80% LTV

Answer

75% LTV

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

The lender pays PMI premiums and waives the mortgage payment for one year

Answer

The lender absorbs the insurance cost on all government loans

Answer

LPMI eliminates mortgage insurance entirely with no cost to the borrower

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

0.55%

Answer

2.50%

Answer

0.85%

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

When the LTV reaches 80%

Answer

After 11 years of on-time payments

Answer

When the loan balance drops below $100,000

Question 6

A CMPS advisor is comparing the total cost of BPMI versus an 80-10-10 piggyback loan structure. The primary goal of the piggyback is to:

Accepted Answer

Avoid PMI by keeping the first mortgage at 80% LTV using a second mortgage for the remaining 10%

Answer

Qualify for a lower FHA rate

Answer

Meet the jumbo loan threshold

Answer

Satisfy lender escrow requirements