Mortgage Loan Originator (MLO) Licensing Practice Test

The correct answer is title binder, which provides temporary coverage to protect the lender or buyer while the final title insurance policy is being prepared. A title binder serves as a preliminary report and offers assurance that the title being insured is free of any defects or claims that could affect ownership. This temporary coverage is significant because it allows the transaction to proceed while the full title insurance policy is finalized, usually encompassing the financial protection needed until the title can be fully verified. In contrast, title abstract refers to a summary of the title history and does not provide coverage; it merely serves as an informative document. Title commitment is a more formal document issued by a title company that outlines the conditions under which the title insurance policy will be issued, but it does not serve as temporary insurance itself. Standard title insurance is a policy that goes into effect once the sale closes and typically provides permanent coverage against losses from title defects, making it distinct from the temporary nature of a title binder.