502.03

Flood Insurance

502.03A

Generally

Operating Procedures

To determine if any buildings located at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). are, or will be, fully or partially located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. , you must:

  • use the FEMAFEMAFederal Emergency Management Agency Standard Flood Hazard Determination Form (SFHDF);
  • evaluate all PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). structures when ordering the SFHDF;
  • provide the vendor supplemental PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). information including the
    • legal description, and
    • survey or site plan;
  • obtain an image overlay from Flood Vendor;
  • ensure the resulting Flood Zone Determination (FZD) form, and any subsequent FZD forms, are effective for the entire Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. term; and
  • retain a signed copy in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .

Requirements

You must ensure the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has flood insurance if:

  • any income-producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). or any non-income producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). that support amenities are in an SFHA ZoneSFHA ZoneSpecial Flood Hazard Area designated by FEMA. starting with the letter A or V; or
  • the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is located within a Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA), regardless of if the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. .

A Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. is ineligible for purchase if the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is in:

  • an SFHASFHASpecial Flood Hazard Area designated by FEMA. ; and
  • a community that does not participate in the NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. .

You must:

  • complete the most recent version of the Standard Flood Hazard Determination Form issued by FEMAFEMAFederal Emergency Management Agency ;
  • retain in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. a
    • copy of the form, and
    • signed copy of Notice to Borrower of Special Flood Hazard and Federal Assistance;
  • require the determination firm, and any monitoring company, to notify you whenever there is a flood zone change; and
  • ensure the coverage:
    • meets the minimum mandatory purchase requirements per:
      • the following Federal flood insurance statutes, as amended and/or restated from time to time, including the:
        • National Flood Insurance Act of 1968 (1968 Act);
        • Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert Waters);
        • Flood Disaster Protection Act of 1973 (FDPA); and

        • Homeowner Flood Insurance Affordability Act of 2014; and

      • any applicable Federal agency rulemaking and publication; and
    • equals at least 100% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. of
      • the first 2 floors above grade, and
      • any ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). below grade;
  • require contents coverage for BorrowerBorrowerPerson who is the obligor per the Note. -owned personal property;
  • ensure you have an established process to obtain an inventory and the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. of BorrowerBorrowerPerson who is the obligor per the Note. -owned contents or business personal property within buildings located in SFHAsSFHAsSpecial Flood Hazard Area designated by FEMA. to determine required coverage; and
  • retain documentation of the presence or absence of BorrowerBorrowerPerson who is the obligor per the Note. -owned contents or business personal property within the building and in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .

Guidance

Generally, contents or business personal property:

  • includes equipment and inventory
    • owned by the BorrowerBorrowerPerson who is the obligor per the Note. , and
    • used in connection with Property’sProperty’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code).
      • ownership,
      • management, or
      • operation; and
  • does not otherwise constitute fixtures.
502.03B

Deductibles

Requirements

You must comply with the following tables.

Flood Maximum Deductibles
For... You must ensure the...
Business income insurance

deductible does not exceed:

 

  • when expressed as a number of days, 15 days; or
  • when expressed as a dollar amount, $100,000.
NFIP policies maximum deductible available under NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. is acceptable.

 

Private Flood Policy Maximum Deductibles
If the Property has... Then maximum deductible per occurrence is...
10 or fewer buildings in SFHA $50,000
More than 10 buildings in SFHA $500,000
502.03C

NFIP Policy

Requirements

You must comply with the following table.

NFIP and Excess Flood Coverage
If... Then...
Coverage available under the NFIP is insufficient the BorrowerBorrowerPerson who is the obligor per the Note. must purchase excess flood insurance covering the difference, up to the required coverage amount.

Per elevation certificates completed by a licensed land surveyor, engineer, or architect:

 

  • any of the building's Lowest Adjacent Grade (LAG) are above Base Flood Elevation (BFE); and 
  • the Borrower confirms application for a Letter of Map Amendment (LoMA)
  • only NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. insurance is required for those buildings, and
  • the maximum term for only NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act.  insurance is 12 months.

To remove a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). /building from an SFHASFHASpecial Flood Hazard Area designated by FEMA. , only an updated FEMAFEMAFederal Emergency Management Agency Standard Flood Hazard Determination Form (SFHDF) based on the following is acceptable:

  • Letter of Map Amendment (LoMA);
  • Letter of Map Revision (LoMR); or
  • Letter of Determination Review (LoDR).

During the LoMA process,

  • only NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. insurance is required, and
  • the maximum term for NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. insurance is 12 months.

If any ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). are reclassified as within an SFHA ZoneSFHA ZoneSpecial Flood Hazard Area designated by FEMA. starting with the letter A or V after you DeliverDeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , you must require the BorrowerBorrowerPerson who is the obligor per the Note. to obtain compliant flood insurance.

Guidance

To prevent the BorrowerBorrowerPerson who is the obligor per the Note. from paying for more coverage than an NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. policy would pay out, you should evaluate the extent of recovery allowed under the NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. policy for the type of building being insured.

If all buildings do not require flood insurance, but the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ingress is located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. , you should consider requiring business income insurance for excess flood to cover all buildings.

Flood insurance is not required if only unimproved portions of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , or non-income producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). that do not support amenities at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , are located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. . 

Non-Income Producing Improvements
Supporting amenities include... Not supporting amenities include...
  • clubhouses, and
  • pool houses.
  • sheds,
  • pump houses, and
  • storage buildings.

Business income insurance is not required for non-income producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). . 

You should consider that

  • conditions may change over time, and
  • flood zones may be remapped. 

You or Fannie Mae may require flood insurance for ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). outside an SFHA ZoneSFHA ZoneSpecial Flood Hazard Area designated by FEMA. starting with the letter A or V, but within an area designated by FEMAFEMAFederal Emergency Management Agency as Zone X or Zone D (for example, if a Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). location is subject to flooding due to storm water, or within close proximity to an SFHASFHASpecial Flood Hazard Area designated by FEMA. boundary).

The acceptable deductible for excess flood insurance is the coverage limit of the underlying NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. policy.

Elevation certificates are not valid to determine if ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). are in an SFHASFHASpecial Flood Hazard Area designated by FEMA. . 

You should:

  • obtain flood zone determinations from qualified third-party flood-zone determination firms; and
  • exercise care and sound judgment when selecting the firm.

Operating Procedures

You must:

  • obtain life-of-loan monitoring for each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). from a third-party flood-zone determination firm;
  • complete FEMA'sFEMA'sFederal Emergency Management Agency Standard Flood Hazard Determination form to determine if any ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). are located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. ; and
  • retain in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. :
    • a completed copy of the form;
    • a signed copy of the Notice to Borrower of Special Flood Hazard and Federal Assistance (included in the Flood Determination Certificate); and
    • if you permitted a reduced amount of excess flood insurance,
      • your analysis, and
      • related documentation supporting the economic feasibility and reduction amount.
502.03D

Private Flood Policy

Requirements

You must ensure a private flood insurance policy:

  • is written on a Replacement Cost Valuation basis without any deduction for depreciation; and
  • provides coverage and terms as broad as or better than the coverage and terms provided under a standard flood insurance policy issued under the NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. .