Chapter 5
| Section 501 | |
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| 501.01A | |
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Guidance
When terms or acronyms for insurance forms and policies are capitalized in this Chapter, they refer to Insurance Services Office (ISO) forms and policies or their equivalent. Other capitalized terms and acronyms have standard insurance industry meanings.
Requirements
As of the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , you must ensure 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). is covered by compliant property insurance and liability insurance.
You must ensure all insurance policies:
- list the BorrowerBorrowerPerson who is the obligor per the Note. as a named insured;
- are written on an Occurrence-Based Policy, except the following, which may be written on an Occurrence-Based Policy or a Claims-Made Policy:
- earthquake insurance;
- directors' and officers' insurance;
- professional liability insurance; and
- general liability insurance for Seniors Housing PropertiesSeniors Housing PropertiesMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. only when combined with professional liability insurance;
- unless the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan.
expressly state otherwise, require the carrier to notify the named Mortgagee and/or Additional Insured in writing
- at least 10 days before policy cancellation for non-payment of premium, and
- 30 days before cancellation for any other reason;
- except for professional liability insurance, name:
- Fannie Mae as Additional Insured on
- general liability insurance, and
- excess/umbrella insurance; and
- "Fannie Mae, its successors, and assigns" as Mortgagee and Loss Payee on property insurance; and
- Fannie Mae as Additional Insured on
- use Replacement Cost Basis; however, coverage for roofs may use
- Actual Cash Basis, or
- Replacement Cost Basis.
Guidance
You should:
- obtain the advance cancellation notice for the benefit of each Mortgagee and Additional Insured from the insurance carriers whenever possible; or
- if the insurer will not provide advance cancellation notices, ensure the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan.
were not modified in any manner limiting:
- the Borrower’sBorrower’sPerson who is the obligor per the Note. obligation to promptly inform you of any notice of cancellation it receives from an insurance carrier; or
- any recourse liability of the BorrowerBorrowerPerson who is the obligor per the Note.
or any GuarantorGuarantorKey Principal or other Person executing a
Payment Guaranty,
Non-Recourse Guaranty, or
any other Mortgage Loan guaranty.
for failing to maintain all insurance coverages required by the
- Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , and
- GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. .
When 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). management company provides insurance, you should confirm the BorrowerBorrowerPerson who is the obligor per the Note. is listed as an Additional Insured on the applicable policies.
An acceptable mortgagee clause is:
Fannie Mae, its successors and/or assigns, as their interest may appear
c/o [Lender Name]
Lender’s Street Address or PO Box
Lender’s City, State and Zip Code
If the insurer will not provide advance cancellation notices, your Servicing FileServicing FileYour file for each Mortgage Loan serviced. must include
- evidence of your attempts to obtain the notice provisions, and
- a copy of the state statute regarding cancelation notification.
Requirements
You must ensure:
- any blanket policy coverage is as good as, or better than, a single property insurance policy; and
- 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 listed and identified in the policy or associated schedules.
Guidance
A blanket policy may include
- blanket policies,
- blanket programs,
- first loss limit policies,
- first loss policies,
- layered programs,
- master policies,
- master programs,
- property programs,
- pooled insurance,
- scheduled limit policies,
- pooled programs,
- shared limit policies, and
- similar programs insuring multiple locations under the same insurance policy.
You may accept a blanket policy if
- all other requirements are met, and
- the Terms and Conditions endorsement does not reduce, limit, or exclude any required coverage.
When evaluating a blanket policy or multiple property policies, you should consider:
- Are the required coverages adequate for 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). ?
- If the blanket policy limits are less than 100% of the Total Insurable ValueTotal Insurable ValueFor any Property, the sum of the full value of the insured's: covered Property; Property-related business income values; and any other covered Property interests. of the covered properties, is the shortfall warranted by high policy limits and geographic dispersion?
- If the blanket policy covers high catastrophic exposure in a geographically concentrated area, is the limit adequate for the exposure, or should the BorrowerBorrowerPerson who is the obligor per the Note. obtain additional coverage?
Programs insuring properties that are not under common ownership with the BorrowerBorrowerPerson who is the obligor per the Note. or a Key PrincipalKey PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , PrincipalPrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,…, SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). , or AffiliateAffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… of the BorrowerBorrowerPerson who is the obligor per the Note. , or managed by the same property management company, may provide evidence of insurance that appears to be a standard layered program.
You should look for red flags signaling that a program may not be a standard layered program, such as:
- the BorrowerBorrowerPerson who is the obligor per the Note. or SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). is not the first named insured;
- the premium significantly decreased when 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). was added to an existing policy; or
- having a large, rounded coverage limit for property insurance.
You may confirm common ownership through an insurance broker or agent. If the covered properties are not related by ownership or under the same PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager, you should also evaluate the insurance administrator, considering
- the acceptability of its business practices,
- possible payment of claims, and
- years in business, etc.
You must
- clearly document your analysis of any blanket policy (related or unrelated entities) in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. , and
- include supported conclusions.
Requirements
You must ensure any Risk Retention GroupRisk Retention GroupState-chartered insurance company created by the 1986 federal Liability Risk Retention Act, insuring commercial businesses and government entities against liability risks. or Captive InsurerCaptive InsurerInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. has a rating of at least:
- A- / VI from A.M. Best Company; or
- A from Demotech, Inc.
For any Risk Retention GroupRisk Retention GroupState-chartered insurance company created by the 1986 federal Liability Risk Retention Act, insuring commercial businesses and government entities against liability risks. or Captive InsurerCaptive InsurerInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. that is not satisfactorily rated, before Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. , you must:
- obtain and review the applicable information in the Unrated Risk Retention Group or Captive Insurer table; and
- submit a
- written summary, and
- recommendation for approval, explaining
- any non-compliant requirements,
- any adverse findings, and
- your rationale for recommending approval.
| Unrated Risk Retention Group or Captive Insurer | |
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| Document/Entity | Description |
| Certificate of Authority (CA) |
State-issued license to an insurance company to conduct business, and includes the
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| State Examination Report |
Report covering a specific timeframe that:
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| Actuarial Report |
Report culminating with a statement of actuarial opinion (minimum requirement) after evaluating, opining, and certifying the adequacy of the Captive Insurer'sCaptive Insurer'sInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits.
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| Loss History | Frequency and severity of insurance losses covered by the Captive Insurer'sCaptive Insurer'sInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. policy during a specific timeframe. |
| Reinsurance and/or Fronting Company |
Reinsurance is when an insurer transfers all or part of a risk to another insurer to reduce the risk for the first insurance.
Fronting company is using a licensed, admitted insurer to issue an insurance policy on behalf of a self-insured organization or Captive InsurerCaptive InsurerInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. without intending to transfer any of the risk. The risk of loss is retained by the self-insured or Captive InsurerCaptive InsurerInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. with an indemnity or reinsurance agreement. |
| Captive Insurer |
Captive InsurerCaptive InsurerInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. is either a:
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Guidance
Captive InsurersCaptive InsurersInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. (and similar arrangements):
- may have lower capitalization requirements than traditional insurance companies; and
- are not usually rated by a recognized rating agency.
For Captive InsurersCaptive InsurersInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. , you should:
- confirm they
- are financially stable, and
- have adequate funds to cover potential losses; and
- review additional documents as warranted.
Operating Procedures
You must submit all documents for unrated Captive InsurersCaptive InsurersInsurance company wholly owned and controlled by its insureds, whose primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits. or Risk Retention GroupsRisk Retention GroupsState-chartered insurance company created by the 1986 federal Liability Risk Retention Act, insuring commercial businesses and government entities against liability risks. :
- through DUS GatewayDUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. , for new 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. submissions; and
- annually through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. , for Portfolio Mortgage LoansPortfolio Mortgage LoansMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. .
| 501.01D | |
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Requirements
You do not need to rate
- State pools or funds, or
- NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. policies.
| All Other Insurance Carrier Ratings | |
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| You must ensure... | The insurance carrier... |
| For a new policy |
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| For an existing policy (at origination or afterward) |
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Guidance
A new policy is one that is
- not already in force, and
- most common for an AcquisitionAcquisitionAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. .
An existing policy is
- most common for a refinance, or
- when 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 added to a policy that the BorrowerBorrowerPerson who is the obligor per the Note. already has in force.
| 501.01E | |
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Guidance
Policies should have a term of at least 12 months. For new Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. , 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). may be added mid-term to an existing 12-month policy.
You may accept a policy term of less than 12 months if, when it expires, the policy will be renewed for at least 12 months.
| 501.01F | |
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Requirements
You must:
- ensure premiums for all required insurance policies are either:
- paid in full annually; or
- payable in installments, for which you have receipts confirming timely payment;
- not provide premium financing to the BorrowerBorrowerPerson who is the obligor per the Note. ; and
- only permit third-party premium financing if the financing agreement:
- has no negative impact on
- you,
- Fannie Mae, or
- 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. collateral;
- does not include any conditions that could prevent you or Fannie Mae from receiving the insurance proceeds; and
- the Modifications to Multifamily Loan and Security Agreement (Financing of Insurance Premiums) (Form 6272) was executed.
- has no negative impact on
If the BorrowerBorrowerPerson who is the obligor per the Note. finances premiums, you must
- review the financing agreement,
- confirm timely payment of each premium was made, and
- retain in the Servicing file
- the financing agreement, and
- evidence of premium payments.
| 501.01G | |
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Requirements
You must have:
- temporary or permanent evidence of insurance when 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. closes; and
- permanent evidence of insurance within 90 days after 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. DeliveryDeliverySubmission 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. .
Guidance
| Acceptable Evidence of Insurance | |
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| Acceptable Temporary Evidence Forms | Acceptable Permanent Evidence Forms |
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The following are not acceptable forms of permanent evidence:
- insurance policy declarations pages (except for an NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. policy);
- single policy endorsement;
- insurance binders; and
- certificates of insurance.
Some insurance carriers use boilerplate policies that do not change from year to year. If so, you:
- should keep a specimen kit or library of such policies and endorsements; and
- may place only the renewal Declarations Page in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. as permanent evidence along with a list of endorsements.
| 501.01H | |
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Requirements
Post-closing exception request submissions must include current information.
All exceptions, including those delegated, must be documented in the applicable business application.
You must submit any insurance exception request:
- through DUS GatewayDUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. with all applicable data fields completed in the system, not via an attached waiver document;
- at least 72 hours before Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. ; and
- with all supporting documentation.
Guidance
If the waiver is approved 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, it will be stated in the approval.
| 501.02 | |
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| 501.02A | |
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Requirements
You must ensure:
- 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). has property insurance throughout 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. term;
- the coverage is:
- written on a Special Causes of Loss Form, or its equivalent; and
- at least
- 100% of estimated 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. for a single-building PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , and
- 90% of estimated 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. for a multiple-building PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
- if a blanket policy has scheduled limits per building, each building is insured to 100% of the estimated 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. ; and
- coinsurance does not exceed 90% on any coverage.
The maximum deductible:
- is based on the Total Insurable ValuesTotal Insurable ValuesFor any Property, the sum of the full value of the insured's: covered Property; Property-related business income values; and any other covered Property interests. of the insurance policy;
- amounts, unless otherwise specified, apply to all insurance coverages required by:
- for the peril of wind/hail (unrelated to a catastrophic peril), must not exceed 3% 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. ; and
- for all other perils, must comply with the following table.
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If the Total Insurable Value is... |
The maximum deductible amount per occurrence is... |
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Less than $5 million |
$25,000 |
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Equal to or greater than $5 million, but less than $50 million |
$50,000 |
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Equal to or greater than $50 million, but less than $100 million |
$100,000 |
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Equal to or greater than $100 million |
$250,000 |
Guidance
100% coinsurance with the Agreed Value Endorsement is acceptable. Renewal of the Agreed Value Endorsement
- is not automatic, and
- must be confirmed at each renewal.
You should:
- assess the Borrower’sBorrower’sPerson who is the obligor per the Note.
ability to pay any deductible, even compliant ones:
- before accepting any deductibles; and
- throughout the policy term;
- determine the high deductible financial exposure by considering total out of pocket expenses rather than only the difference between the
- maximum allowable deductible, and
- requested/actual deductible; and
- if insurance coverage is provided on a management company’s or unrelated entities’ master property program, then only use the Borrower’sBorrower’sPerson who is the obligor per the Note. owned or related properties to determine the maximum deductible.
A margin clause:
- should not be used to determine compliant property insurance limits; and
- may contain provisions limiting additional coverage availability.
| 501.02B | |
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Guidance
You may accept a Property and Liability policy that includes aggregate deductibles. The aggregate deductible may be higher than the maximum deductible required per Part II, Chapter 5: Property and Liability Insurance, Section 501.02A: Minimum Coverage Amounts.
Requirements
If you accept a Property and Liability policy that includes aggregate deductibles, you must:
- confirm the aggregate deductible amount is fully funded and held by:
- the BorrowerBorrowerPerson who is the obligor per the Note. in a segregated bank account;
- you in the Tax and InsuranceTax and InsuranceTaxes or assessments that may become a Lien on the Property and insurance premiums. escrow; or
- a third party for the Borrower'sBorrower'sPerson who is the obligor per the Note. benefit; and
- require any claim checks to:
- list you as payee c/o Fannie Mae; and
- be considered insurance loss proceeds per the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
Requirements
You must ensure:
- 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).
has business income insurance (including rental value insurance), for all required coverages, including
- ordinance or law (Coverage D),
- windstorm,
- flood,
- earthquake, and
- terrorism, etc.;
- coverage is based on:
- Actual Loss Sustained for 12 months; or
- the most recent annual reported (or annualized if annual financial are unavailable):
- EGIEGIOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. ; or
- NOINOIAnnually or for any specified period, the total Effective Gross Income minus the Property’s operating expenses. plus continuing expenses, with a completed business income worksheet submitted by the Borrower'sBorrower'sPerson who is the obligor per the Note. agent/broker;
- the maximum deductible for business income insurance does not exceed the greater of
- the maximum deductible for the property insurance policy, or
- a waiting period up to 72 hours; and
- coverage for 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. with a UPBUPBUnpaid Principal Balance of $25 million or more includes a 90-day Extended Period of Indemnity option.
| 501.02D | |
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Requirements
You must ensure every 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 ordinance or law insurance:
- for all perils, even if insured on a standalone policy; and
- 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 non-conforming under any current land use law or ordinance, and cannot be rebuilt "as is", and/or
- was constructed 25 years or more before DeliveryDeliverySubmission 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. .
Ordinance or law insurance is not required 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). was constructed 25 years or more before DeliveryDeliverySubmission 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. , but was substantially rehabilitated (i.e., all fixtures and building materials were removed down to the studs, then rebuilt to then current building codes); or
- Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. was before February 3, 2014 and the 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). characteristics are legally conforming, regardless of the build date.
| Coverages | If ordinance or law insurance is required, you must ensure the Property has all of the following... |
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| Coverage A |
Loss of Undamaged Portion, in an amount equal to
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| Coverage B | Demolition/Debris Removal Cost equal to at least 10% 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. . |
| Coverage C | Increased Cost of Construction equal to at least 10% 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. . |
Guidance
Examples of ordinance or laws include
- bulk restrictions,
- building,
- zoning,
- energy management,
- green, or
- Fair Housing Act accessibility.
Rebuilding "as is" refers to the ability to build the same square footage within the same building footprint without increasing the non-conformity, as defined by the local ordinance. You should determine the feasibility of rebuilding within any time frame required by the ordinance.
Ordinance and law insurance maybe needed, even if it is legally conforming under current zoning law, because the construction cost will likely be significantly higher due to changes in building codes and construction requirements.
Some municipalities have no zoning districts. This primarily refers to use. Usually, buildings are still subject to building and safety codes; therefore, coverage is required.
| Required Limits Example | |
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| If... | Then the required coverage is... |
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the Insurable Value equals
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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. , minus the damage threshold specified by the local building ordinance (e.g., $10 million - $7.5 million = $2.5 million for Coverage A). |
| Coverages A, B, and C are combined | the Coverage A amount plus 10% 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. for Coverage B plus 10% 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. for Coverage C (e.g., $2.5 million + $1 million + $1 million = $4.5 million). |
| Coverages B and C are combined | 10% 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. for Coverage B plus 10% 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. for Coverage C (e.g., $1 million + $1 million = $2 million). |
If law and ordinance insurance is required, the Increased Period of Restoration endorsement (Coverage D) is required. Coverage D for law and ordinance insurance:
- extends the business:
- income and extra expense coverage; and
- additional time to restore operations when delayed due to enforcement of building or zoning laws; and
- is paid from the 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). business income/rent loss coverage.
Without this Increased Period of Restoration endorsement, business income coverage does not include any “increased period” that may be necessary due to enforcement of an ordinance or law.
When evaluating this coverage you should ensure the business income/rent loss limit is adequate to reflect the increased period of restoration.
Guidance
Equipment Breakdown Insurance covers the:
- loss due to mechanical or electrical breakdown of equipment; and
- cost to repair or replace equipment and other damaged property.
Boiler and Machinery Insurance covers unforeseen breakdown of machinery involving equipment specifically identified in the policy. The breakdown must result:
- from a cause listed in the policy; and
- in direct equipment damage.
Requirements
You must ensure:
- 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). with any high-pressure, centralized HVAC boiler, water heater, or other vessel that is in operation and regulated by the state or municipality where 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 has full Boiler and Machinery Insurance; and
- the coverage 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 each building housing the equipment.
| 501.02F | |
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Requirements
You must ensure:
- if property insurance coverage is excluded during construction or significant renovation or restoration, 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 builder's risk insurance during such activity; and
- the coverage equals at least 100% of the completed value, on a non-reporting basis.
| 501.02G | |
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Requirements
You must ensure:
- 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). owned by a Cooperative OrganizationCooperative OrganizationCorporation or legal entity where each shareholder or equity owner is granted the right to occupy a unit in a multifamily residential property under a proprietary lease or occupancy agreement. has fidelity bond/crime insurance in an amount covering scheduled Cooperative Maintenance FeesCooperative Maintenance FeesPeriodic fee assessed each shareholder or owner of a Cooperative Organization to fund costs and expenses associated with ongoing operations of the Cooperative Property. for at least 3 months; and
- the fidelity bond/crime insurance deductible does not exceed $25,000.
| 501.02H | |
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Requirements
You must ensure:
- if 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). is in an area prone to geological phenomena, the property insurance coverage includes those phenomena; and
- the coverage equals 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. .
Guidance
Examples of geological phenomena include
- sinkhole,
- mine subsidence,
- volcanic eruption, and
- avalanche.
| 501.03 | |
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| 501.03A | |
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Requirements
You must ensure:
- 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). has the coverages required by Part II, Chapter 5: Property and Liability Insurance, Section 501.03: Catastrophic Risk Insurance for perils related to catastrophic loss 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 area prone to Catastrophic EventsCatastrophic EventsNatural or man-made hazard resulting in an event of substantial extent causing significant physical damage or destruction, loss of life, or drastic change to the natural environment, such as earthquake, flood, terrorist attack, or windstorm. ;
- 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 a separate insurance policy if the Special Causes of Loss Form excludes a Catastrophic EventCatastrophic EventNatural or man-made hazard resulting in an event of substantial extent causing significant physical damage or destruction, loss of life, or drastic change to the natural environment, such as earthquake, flood, terrorist attack, or windstorm. coverage that is required; and
- if ordinance or law coverage is required on the property policy, then coverage is obtained for catastrophic losses if the catastrophic peril is insured on a standalone policy.
| 501.03B | |
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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 separate windstorm insurance if the Special Causes of Loss Form excludes any type of wind-related Catastrophic EventCatastrophic EventNatural or man-made hazard resulting in an event of substantial extent causing significant physical damage or destruction, loss of life, or drastic change to the natural environment, such as earthquake, flood, terrorist attack, or windstorm. ;
- coverage 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. ;
- valuation does not rely solely on Probable Maximum Loss (PML) calculations; and
- deductible does not exceed the greatest of
- 10% 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. ,
- the applicable maximum amount per Part II, Chapter 5: Property and Liability Insurance, Section 501.02A: Minimum Coverage Amounts, and
- for business income insurance, the greater of
- the maximum deductible for the property insurance policy, or
- an amount equal to 15 days of business income or equivalent.
Guidance
If a business income insurance deductible is stated as a total dollar amount, you should:
- calculate the deductible on a per day basis; and
- ensure the aggregate per day amount does not exceed 15 days of income.
For example:
If the business income requirement is $1,000,000, and the policy indicates a business income deductible of $100,000, and the maximum deductible allowed for 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 the greater of (a) $25,000, or (b) an amount equal to 15 days of income, the policy is not compliant since:
- $1,000,000 divided by 365 equals $2,740 per day;
- $2,740 multiplied by 15 days equals $41,095; and
- $100,000 is higher than both the allowed $25,000 PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). deductible and the total 15-day calculation.
If catastrophic windstorm coverage is unavailable in the market, Fannie Mae will consider approving 1 of the following options:
- a state insurance plan; or
- state-managed insurance pool for
- windstorm, or
- beach erosion.
Catastrophic windstorm coverage:
- includes hurricane and tropical storm damage; and
- may be categorized or defined in the insurance policy using terms such as
- named storm, or
- tier one, etc.
If windstorm coverage is unavailable or is not economically feasible, you may submit the following for Pre-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. :
- a recommendation for a reasonable coverage amount, given the exposure and based on your knowledge 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). and BorrowerBorrowerPerson who is the obligor per the Note. ;
- all compelling reasons for approving the request;
- the 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). precise location;
- blanket analysis per Part II, Chapter 5: Property and Liability Insurance, Section 501.01B: Blanket and Other Policies Covering Multiple Properties;
- construction analysis; and
- any financial mitigants available.
| 501.03C | |
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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 ensure the coverage:
- meets the mandatory purchase requirements identified in
- the Federal flood insurance statutes, and
- any applicable Federal agency rulemaking and publication;
- has a waiting period no more than 15 days; 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, plus
- all Fixtures and Goods (as defined in the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. ) located on the first 2 floors above grade and/or below grade.
You must ensure the deductible does not exceed the greatest of:
- 5% 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. ;
- the applicable maximum amount in Part II, Chapter 5: Property and Liability Insurance, Section 501.02A: Minimum Coverage Amounts; or
- for business income insurance,
- the maximum deductible for the property insurance, or
- a waiting period of up to 15 days or equivalent.
| 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:
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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
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... |
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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;
- exercise care and sound judgment when selecting the firm; and
- require the determination firm, and any monitoring company, to notify you whenever there is a flood zone change.
For business income insurance deductible, if a dollar amount is indicated, you should calculate the per day amount ensuring the deductible does not exceed the 15-day total amount allowed. See Part II, Chapter 5: Property and Liability Insurance, Section 501.03B: Windstorm Insurance for a deductible calculation example.
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.
| 501.03D | |
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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 earthquake insurance if required by Fannie Mae. For any required coverage, ensure the:
- coverage is 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. ;
- waiting period is no more than 15 days; and
- deductible does not exceed the greatest of:
- 10% of the insurable PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). value;
- the applicable maximum amount per Part II, Chapter 5: Property and Liability Insurance, Section 501.02A: Minimum Coverage Amounts; and
- for business income insurance, the greater of
- the maximum deductible for the property insurance policy, or
- a 15-day waiting period.
Earthquake insurance may be required while 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 being retrofitted.
Guidance
For business income insurance deductible, if a dollar amount is indicated, you should calculate the per day amount ensuring the deductible does not exceed the 15-day total amount allowed. See Part II, Chapter 5: Property and Liability Insurance, Section 501.03B: Windstorm Insurance for a deductible calculation example.
Operating Procedures
If retrofitting is required and not completed within the agreed timeframe, you must not accept earthquake insurance as a substitute.
| 501.03E | |
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Requirements
You must ensure:
- 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).
has terrorism insurance for property damage/casualty and liability exposures, unless
- it secures 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. with a UPBUPBUnpaid Principal Balance less than $25 million, and
- you performed a risk assessment indicating no or low terrorism risk;
- the coverage is 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. attributed only to the 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). ; and
- the deductible does not exceed the greatest of:
- 20% 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. ;
- the applicable maximum amount per Part II, Chapter 5: Property and Liability Insurance, Section 501.02A: Minimum Coverage Amounts; and
- for business income insurance,
- the maximum deductible for the property insurance policy, or
- a 15-day waiting period.
Guidance
You should ensure your risk assessment considers:
- concentrations of risk and overall exposures;
- the 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 relative to potential terrorist targets, such as
- tourist attractions,
- power grids,
- mass transportation facilities, and
- government buildings; and
- how far reaching a terrorist event could be, for example a:
- mass transit facility directly below 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). and an airport 5 miles away; and
- biohazard or nuclear facility within the 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). vicinity.
For business income insurance deductible, if a dollar amount is indicated, you should calculate the per day amount ensuring the deductible does not exceed the 15-day total amount allowed. See Part II, Chapter 5: Property and Liability Insurance, Section 501.03B: Windstorm Insurance for a deductible calculation example.
You must retain a copy of your risk assessment in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .
| 501.04 | |
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Requirements
You must ensure 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). and BorrowerBorrowerPerson who is the obligor per the Note. is covered, without exclusions, throughout 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. term by liability insurance for
- bodily injury,
- PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). damage, and
- personal injury.
Requirements
You must ensure the general liability insurance coverage is at least
- $1 million per occurrence/$2 million general aggregate limit, plus
- excess/umbrella insurance as follows:
|
If the number of stories in the building is... |
The minimum excess/umbrella insurance coverage is... |
|---|---|
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1 - 4 |
$2 million |
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5 - 10 |
$5 million |
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11 - 20 |
$10 million |
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Over 20 |
$20 million |
The maximum deductibles:
- apply to
- general liability,
- umbrella/excess liability, and
- professional liability; and
- must be based on the Total Insurable ValueTotal Insurable ValueFor any Property, the sum of the full value of the insured's: covered Property; Property-related business income values; and any other covered Property interests. 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). insurance policy as follows:
|
If the Total Insurable Value is... |
The maximum deductible amount per occurrence is... |
|---|---|
|
Less than $5 million |
$50,000 |
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Equal to or greater than $5 million, but less than $50 million |
$100,000 |
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Equal to or greater than $50 million, but less than $100 million |
$150,000 |
|
Equal to or greater than $100 million |
$275,000 |
Guidance
You may satisfy the insurance coverage requirements:
- with any combination of primary liability insurance and excess/umbrella insurance coverage, provided the aggregate coverage meets the required minimum limits; and
- for excess/umbrella insurance, when the coverage limit meets the requirement for the location with the most stories.
You should ensure that any liability policy does not contain exclusions for normal coverage that are normal and customary in the standard liability form, such as
- assault and battery,
- animal attacks, and
- firearms, etc.
The maximum deductible amount, per occurrence, is the combined deductible for both the
- underlying general or professional liability, and
- excess/umbrella liability.
For example, if the Total Insurable ValueTotal Insurable ValueFor any Property, the sum of the full value of the insured's: covered Property; Property-related business income values; and any other covered Property interests. is $45 million, then the maximum deductible is $100,000 combined for the underlying liability and excess/umbrella liability in any combination (e.g., $75,000 deductible/self-insured retention on the general liability and $25,000 on the excess/umbrella liability).
| 501.04B | |
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Requirements
If a Seniors Housing PropertySeniors Housing PropertyMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. provides any level of healthcare, 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 professional liability insurance covering
- professional errors and omissions,
- medical malpractice, and
- all types of abuse; and
- coverage is at least
- $1 million per occurrence/$2 million general aggregate limit, plus
- excess/umbrella insurance as follows:
|
If the number of licensed beds is... |
The minimum excess/umbrella insurance coverage is... |
|---|---|
|
1 - 100 |
$2 million |
|
101 - 500 |
$5 million |
|
501 - 1,000 |
$10 million |
|
Over 1,000 |
$20 million |
You must ensure:
- for 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). with Assisted LivingAssisted LivingSeniors Housing Property offering services limited to non-medical personal care, including ADL assistance, which are typically licensed and regulated by a state or local governmental authority. beds, Independent LivingIndependent LivingSeniors Housing providing limited programs of assistance for domestic activities (e.g. meals, housekeeping, activities, transportation, etc.), and typically resembles market rate units. beds are not counted when determining the minimum coverage limit;
- when general liability insurance and professional liability insurance coverages are combined under an excess/umbrella insurance policy, the coverage meets the higher minimum limit of the 2 underlying coverages; and
- the maximum deductible for professional liability insurance does not exceed the applicable maximum amount per Part II, Chapter 5: Property and Liability Insurance, Section 501.04A: Commercial General Liability Insurance.
Guidance
When using a Claims-Made Policy, you should consider if an adequate “retroactive date” is in place providing coverage for acts that occurred before a specified date – usually before the effective date of the current policy. A retroactive date of 3 - 5 years before the current policy’s effective date is common.
If the BorrowerBorrowerPerson who is the obligor per the Note. changes carriers during 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. term, the addition of tail coverage or an extended reporting period endorsement, extending coverage after the cancellation or termination of a Claims-Made Policy, is important to ensure no lapse in coverage occurs.
You may satisfy the coverage requirements:
- with any combination of primary liability insurance and excess/umbrella insurance coverage, provided the aggregate coverage meets the required minimum limits; and
- for excess/umbrella insurance when the coverage limit meets the requirement for the location with the most beds.
| 501.04C | |
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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 workers’ compensation and employer’s liability insurance (including terrorism coverage), if required where 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; and
- coverage meets the statutory limits.
Requirements
You must ensure 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). owned by a Cooperative OrganizationCooperative OrganizationCorporation or legal entity where each shareholder or equity owner is granted the right to occupy a unit in a multifamily residential property under a proprietary lease or occupancy agreement. has:
- directors’ and officers’ liability insurance; and
- coverage equal to at least $1 million per occurrence.
| Section 502 | |
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Guidance
Any environmental conditions or risks impacting 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). should be fully understood and considered in the underwriting.
Requirements
You must:
- comply with the Environmental Due Diligence Requirements (Form 4251), including obtaining a Phase I Environmental Site AssessmentPhase I Environmental Site AssessmentEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. (Phase I ESA) of the entire PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
- ensure the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report.
:
- is performed per the instructions in Form 4251, including meeting the current requirements of ASTMASTMAmerican Society for Testing Materials E1527;
- is prepared by an environmental professional as that term is defined in 40 C.F.R. § 312.10 (an Environmental Professional);
- identifies all environmental conditions and risks that may potentially impact
- resident safety,
- marketability, or
- PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). value; and
- clearly identifies how to properly mitigate those conditions and risks, including where applicable:
- the Environmental Professional’s recommendations regarding additional investigation, or requirements of government authority or regulatory agency; or
- action to remediate or abate any Recognized Environmental Condition (REC)/Controlled Recognized Environmental Condition (CREC), as those terms are defined in ASTMASTMAmerican Society for Testing Materials E1527; and
- obtain Fannie Mae's approval before Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. if the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. identified any RECs/CRECs.
Guidance
You may rely on a preliminary or draft Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. to obtain a Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. and CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. .
| 502.02 | |
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Requirements
You must:
- Obtain all investigations recommended or indicated by the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
- Conduct a thorough review and analysis of the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
- Provide the Environmental Professional with all available prior Phase I ESAsPhase I ESAsEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. , investigations, and any relevant and readily available environmental materials.
- Provide the AppraiserAppraiserPerson engaged to estimate a Property’s market value per USPAP. with any documentation from the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. necessary to accurately assess the 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). value.
- Identify if the 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). state has an environmental Super Lien Statute and, if so, confirm PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). conditions are unlikely to result in the imposition of a super lien having priority over the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. .
- Disclose to Fannie Mae your knowledge of any actual or suspected environmental conditions affecting 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). , whether or not disclosed in the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
- Ensure any required Operations and Maintenance Plans (O&M Plans) are obtained and located on the site throughout 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. term.
- Assess the Borrower’sBorrower’sPerson who is the obligor per the Note. ability to carry out any O&M PlanO&M PlanRequired plan for remediating a Recognized Environmental Condition or Business Enivronmental Risk as described in Environmental Due Diligence Requirements (Form 4251). .
- Not 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. 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. if the BorrowerBorrowerPerson who is the obligor per the Note. or its agents are not financially or organizationally capable of satisfying the requirements of the O&M PlanO&M PlanRequired plan for remediating a Recognized Environmental Condition or Business Enivronmental Risk as described in Environmental Due Diligence Requirements (Form 4251). .
- Evaluate the potential risk of loss and liability to 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).
, the BorrowerBorrowerPerson who is the obligor per the Note.
, you, or Fannie Mae posed by any
- REC/CREC,
- Business Environmental RiskBusiness Environmental RiskRisk of material environmental or environmentally-driven impact on the business or property associated with a Property or the past, current or planned use of a Property, including all “non-scope considerations” under current ASTM E 1527, asbestos or asbestos-containing materials, radon, lead-based…, or
- other environmental condition, whether or not disclosed in the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
If you become aware of any REC/CREC, you must:
- Obtain a Remediation Plan from the BorrowerBorrowerPerson who is the obligor per the Note.
that
- is prepared by an Environmental Professional, as required by Form 4251,
- will protect the health and safety of the residents and bring 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). into regulatory compliance, and
- includes a cost estimate and schedule for completing the work.
- Add the estimated cost of the Remediation Plan to the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. requirement of the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
Guidance
The amount funded into the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. should be at least 125% of the estimated cost of the Remediation Plan.
Requirements
You must:
- consider revisions to the Environmental Indemnity Agreement (Form 6085) to protect you and Fannie Mae from liability associated with any
- REC/CREC (including the cost to investigate/remediate any such condition), and
- violation of Environmental LawsEnvironmental LawsAll current federal, state, and local laws, ordinances, regulations, standards, rules, policies, and other governmental requirements, administrative rulings, court judgments, and decrees, and all amendments thereto, relating to pollution or protection of human health, wildlife, wetlands, natural… by the BorrowerBorrowerPerson who is the obligor per the Note. ;
- document your evaluation of potential revisions, including at a minimum, whether the following revisions are appropriate:
- additional representation and warranty where the BorrowerBorrowerPerson who is the obligor per the Note. disclaims responsibility for any REC/CREC, if appropriate and accurate; and
- additional covenant(s) requiring
- implementation of the Remediation Plan,
- compliance with any Environmental Activity and Use LimitationsEnvironmental Activity and Use LimitationsLegal or physical restrictions or limitations on the use of, or access to, all or any portion of a site, facility, groundwater, soils, or other media at, on, about or under a site or facility to reduce or eliminate potential exposure to Hazardous Materials or to prevent activities that could… and/or institutional or engineering controls, and
- maintenance of BorrowerBorrowerPerson who is the obligor per the Note. eligibility for applicable liability protection status;
- specifically identifying any liability associated with the REC/CREC in the indemnification provisions; and
- other required terms and conditions based on Fannie Mae environmental counsel review.
| Section 503 | |
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Requirements
You must:
- assess the seismic risk before Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. by analyzing the PGAPGAPeak Ground Acceleration as determined by the United States Geological Survey. at the 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;
- determine 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). has an acceptable level of seismic risk;
- complete Form 4099.C 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 a High Seismic RiskHigh Seismic RiskArea or a specific site identified by the most recent USGS data (see United States Geological Survey (USGS) Peak Ground Acceleration (PGA) Calculator Tutorial) as having a PGA equal to or greater than 0.15g (i.e., 15% of the acceleration of gravity (g) using a 10% probability of exceedance in a 50… area;
- obtain a Seismic Risk Assessment (SRA) if a Structural Risk Factor is identified per Form 4099.C; and
- not 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.
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.
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).
has
- a PGAPGAPeak Ground Acceleration as determined by the United States Geological Survey. equal to or greater than 0.15g, and
- 1 of these Structural Risk Factors:
- an unreinforced masonry building that has not been seismically retrofitted; or
- a building constructed on a slope with an angle exceeding 30 degrees (a 50% slope).
Guidance
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. , no additional seismic risk evaluation is needed.
Requirements
You must:
- obtain a Level 1 SRA dated within 12 months before the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. for any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with one of the Structural Risk Factors listed in Form 4099.C; and
- ensure the SRA:
- meets the ASTMASTMAmerican Society for Testing Materials seismic standards (ASTMASTMAmerican Society for Testing Materials E2026 – Standard Guide for Seismic Risk Assessment of Buildings and ASTMASTMAmerican Society for Testing Materials E2557 – Standard Practice for Probable Maximum Loss (PML) Evaluations for Earthquake Due Diligence Assessments);
- includes estimates for the Scenario Expected Loss (SEL) and the Scenario Upper Loss (SUL);
- uses a 10% probability of exceedance in a 50-year period;
- meets ASTMASTMAmerican Society for Testing Materials seismic standard professional qualifications; and
- complies with Form 4099.C, including
- structured data per Seismic Risk Assessment Data Supplement (Form 4093), and
- a report narrative.
Guidance
For a Small Mortgage LoanSmall Mortgage LoanMortgage Loan with an original loan amount less than or equal to $9 million. :
- the SRA field investigation may be performed by a PCAPCAAssessment of the Property's physical condition and historical operation. consultant or field observer if that professional has at least 2 years of experience performing seismic risk assessments; and
- a new SRA is not required for Supplemental Mortgage LoansSupplemental Mortgage LoansMortgage Loan purchased by Fannie Mae that is subordinated to, and has a Mortgage Loan Origination Date after, the Senior Mortgage Loan that is also owned by Fannie Mae. ; you may rely on the original underwriting seismic analysis.
Guidance
The 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). SEL percentage and the building stability assessment determines if the seismic risk is acceptable.
Requirements
You must:
- determine if the 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).
seismic risk is acceptable by confirming all 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:
- comply with Part II, Chapter 5: Property and Liability Insurance, Section 503.03: Acceptable Levels of Seismic Risk;
- have an SEL of 20% or less; and
- meet the current building stability requirements of ASTMASTMAmerican Society for Testing Materials E2026; and
- not 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. 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. secured by 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). having 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). with an SEL greater than 40%.
Guidance
Your analysis should include:
- a Level 1 SRA, including Appendix X4 (ASTMASTMAmerican Society for Testing Materials E2557);
- your analysis of the seismic issues and recommendation, describing the:
- severity and pervasiveness of the conditions driving the SEL and stability issues;
- risks presented to
- building stability,
- building damageability,
- site stability, and
- life safety; and
- recommended retrofit or remediation requirements;
- a retrofit letter or the Borrower’sBorrower’sPerson who is the obligor per the Note.
retrofit plan, including the
- timetable, and
- cost estimate;
- Form 4099.C; and
- a minimum of 6 PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the
fee simple or Leasehold interest,
Improvements, and
personal property (per the Uniform Commercial Code).
photos, including
- photos of areas significant to the seismic calculation or stability issue, and
- elevation views of 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).
having
- an SEL over 20%, or
- a stability issue.
| 503.04 | |
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Requirements
You must ensure the SRA describes a proposed retrofit plan, including associated costs, if 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). must be retrofitted under any
- law,
- regulation, or
- ordinance.
| 503.05 | |
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Requirements
For any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). where 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). have an SEL greater than 20% or a building stability issue, you must contact Multifamily InsuranceMultifamily InsuranceTeam that can be contacted at [email protected]. to determine acceptable mitigants for 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. DeliveryDeliverySubmission 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. , including:
- performing a seismic retrofit sufficient to resolve all stability issues and reduce the SEL of all 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). to 20% or below; and
- obtaining earthquake insurance coverage per Part II, Chapter 5: Property and Liability Insurance, Section 501.03D: Earthquake Insurance.
Earthquake insurance does not mitigate seismic risk.