- the terms and amount of coverage are at least equal to that provided under an NFIP policy based on a review of the full policy issued by a private insurer, and
- the insurer meets Fannie Mae's rating requirements as specified in Property Insurer Rating Requirements in B7-3-01, General Property Insurance Requirements for All Property TypesB7-3-01, General Property Insurance Requirements for All Property Types .
A Policy Declaration page is acceptable evidence of flood insurance.
Requirements for One- to Four-Unit Properties
The minimum amount of flood insurance required for first mortgages must be equal to the lesser of
- 100% of the replacement cost value of the improvements,
- the maximum coverage amount available from NFIP, or
- the unpaid principal balance (UPB) of the loan (or loan amount at the time of origination).
See Insurance Requirements for Renovation and Energy Improvement Loans in B7-3-05, Additional Insurance RequirementsB7-3-05, Additional Insurance Requirements for additional information.
See Mortgagee Clause for Property and Flood Insurance and Named Insured for Property and Flood Insurance in B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation RequirementsB7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements for mortgagee clause and named insured requirements.
Requirements for Project Developments
When a loan is secured by a unit in an attached condo or co-op project and flood insurance is required as described in Determining if a Property Requires Flood Insurance, the lender and servicer must verify that the HOA or co-op corporation maintains a master flood insurance policy with premiums paid as a common expense, unless otherwise indicated in the table below.
The following table provides additional requirements based on the project type.
The lender and servicer must verify that the HOA maintains a Residential Condominium Building Associated Policy (RCBAP) or equivalent private flood insurance coverage for a condo building consisting of attached units located within an SFHA. The only building that must be verified is the subject unit's building. Fannie Mae does not require evidence of a master flood insurance policy, provided the unit owner maintains an individual flood dwelling policy that meets the coverage requirements of this Guide for the following loans or project types:
- high LTV refinance loans,
- units in a two- to four-unit project, and
- detached condo properties.
The master flood insurance policy maintained by the HOA must cover the subject unit's
- entire building; and
- all of the common elements and property, including machinery and equipment that are part of the building.
The coverage amount for the building must be at least equal to the lesser of
- 80% of the replacement cost value (1) , or
- the maximum coverage amount available from NFIP per unit (2) .
(1) If the master flood insurance policy meets the minimum coverage requirement of 80% of the replacement cost value, but the per unit coverage amount does not meet the requirement for loans secured by one- to four-unit properties, as described in Requirements for One- to Four-Unit Properties, the unit owner must maintain a supplemental policy for the difference.
(2) If the commercial space of an attached condo is over 25%, coverage provided by the General Property Form (or equivalent coverage) is insufficient. A private flood insurance policy, or a private flood insurance policy in conjunction with a General Property Form policy (or equivalent coverage) must be maintained by the HOA to equate to coverage requirements for projects eligible for an RCBAP.
The contents coverage must equal the lesser of
- 100% of the replacement cost value of all contents owned in common by the association members, or
- the maximum coverage amount available from NFIP.
The lender and servicer must verify that the co-op corporation maintains a General Property Form policy or equivalent private flood insurance coverage for a co-op building that is located within an SFHA.
The master flood insurance policy maintained by the co-op corporation must cover the subject unit's
- entire building, and
- all of the common elements and property, including machinery and equipment that are part of the building.
The coverage amount for the building must be at least equal to the lesser of
- 100% of the replacement cost value, or
- the maximum coverage available from NFIP.
The lender and servicer must verify that each attached or detached individual PUD unit maintains a Dwelling Form policy or equivalent private flood insurance policy on the subject property.
See Requirements for One- to Four-Unit Properties above for the required amount of coverage.
Deductible Requirements
The following table describes the maximum deductible allowed by Fannie Mae for an NFIP or a private flood insurance policy.
| Property Type | Deductible Requirement |
|---|---|
| One- to four-unit properties | The deductible must not exceed the maximum deductible amount currently offered by NFIP for one- to four-unit properties insured under an NFIP Dwelling Form. |
| Condo projects | The deductible must not exceed the maximum deductible amount currently offered by NFIP for condo projects insured by an RCBAP. This deductible requirement applies to all condo projects, regardless of the percentage of commercial space. |
| Co-op projects | The deductible must not exceed the maximum deductible amount currently offered by NFIP for co-op projects insured under an NFIP General Property Form. |
| PUDs | The deductible on individual attached or detached PUD units must not exceed the maximum deductible amount currently offered by NFIP for one- to four-unit properties insured under an NFIP Dwelling Form. |
Delivery Requirements
The following table describes the special feature code requirements applicable to flood insurance. See C1-2-02, Loan Data and Documentation Delivery RequirementsC1-2-02, Loan Data and Documentation Delivery Requirements for detailed loan delivery requirements.
- Some part of a principal and/or residential detached structure is located within an SFHA, and
- Flood insurance coverage is in place on the principal and/or residential detached structure.
- No part of a principal or residential detached structure is located within an SFHA, but
- Flood insurance coverage is in place on the principal and/or residential detached structure.
- No part of a principal or residential detached structure is located within an SFHA, and
- No flood insurance coverage is in place on the principal or residential detached structure.
Note: In addition to these criteria, this special feature code also applies if there is a non-residential detached structure affixed to the land for which any part is in an SFHA.
Requirements During a National Flood Insurance Program Lapse
The NFIP may lapse due to a shutdown of the federal government or if Congress does not renew the NFIP's authorization to issue new policies, increase coverage on existing policies, or issue renewal policies.
For the duration of such a lapse, a lender may sell a loan to Fannie Mae where flood insurance is otherwise required without an active flood insurance policy provided the requirements below are met.
During the lapse, lenders must have a process in place to identify properties securing loans sold to us without proper evidence of active flood insurance on the conditions that the borrower must provide acceptable evidence of:
- a completed application for NFIP flood insurance and proof of the premium payment or the final settlement statement reflecting payment of the initial premium, or
- the assignment of an existing NFIP flood insurance policy from the property seller to the purchaser.
The following table provides additional requirements that lenders and servicers must follow during the lapse.
Continue to make flood determinations, provide timely, complete and accurate notices to borrowers in accordance with applicable laws, and comply with all other flood insurance requirements.
Refinance loans secured by properties where flood insurance is required typically already have acceptable flood insurance coverage in place at the time of closing. Specific requirements for refinance loans are listed below.
must be accurately reflected as the mortgagee named on the policy.
must follow all requirements in this topic adapted appropriately to a renewal.
When delivering loans affected by a lapse of the NFIP, lenders must follow the Delivery Requirements described above and provide all applicable loan delivery data elements as if a required flood insurance policy was in place.
The lender and servicer remain obligated for all selling representations and warranties and servicing obligations concerning the existence of a standard policy issued under the NFIP or an equivalent private flood insurance policy.
Recent Related AnnouncementsNote: Fannie Mae accepts flood insurance policies from private insurers as listed in Acceptable Flood Insurance Policies, but such private flood insurance policy coverage is not a required alternative in the event of a lapse of NFIP coverage.
The table below provides references to recently issued Announcements that are related to this topic.
| Announcements | Issue Date |
|---|---|
| Announcement SEL-2024-01 | February 07, 2024 |
| Announcement SEL-2022-10 | December 14, 2022 |
| Announcement SEL-2021-11 | December 15, 2021 |
| Announcement SEL-2019-07 | August 07, 2019 |
