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 Named 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.
501.01B | |
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Requirements
You must use reliable sources to determine 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. .
Guidance
Common Reliable Sources to Determine Estimated Insurable Value | |
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Resource | Description |
Insurance Company Estimate | An estimate from the insurance company underwriting the property damage insurance. |
Appraisal's Insurable Value | A qualified commercial real estate AppraisalAppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. from an AppraiserAppraiserPerson engaged to estimate a Property’s market value per USPAP. experienced in the market per Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation. |
Contractor | A reputable commercial contractor with experience constructing and/or reconstructing similar area properties. |
Vendor |
A third-party vendor who
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Requirements
You must ensure:
- any Blanket PolicyBlanket PolicyInsurance policy providing coverage for multiple properties and/or multiple perils. 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 Schedule of Values is a list of insurable values (all elements 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. ) the BorrowerBorrowerPerson who is the obligor per the Note. provides to an insurance company for all properties covered under a property insurance policy.
You should:
- review and analyze the Schedule of Values and geographical concentration and/or aggregated values of PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). /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. under the Blanket PolicyBlanket PolicyInsurance policy providing coverage for multiple properties and/or multiple perils. ; and.
- confirm that Blanket Insurance Limits:
- are limited to a 1 per occurrence shared limit for:
- more than 1 property;
- more than 1 category of coverage; or
- both;
- will be reinstated to the pre-loss limits after a casualty; and
- are sufficient to cover the largest 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. .
- are limited to a 1 per occurrence shared limit for:
You must
- clearly document your analysis of any Blanket PolicyBlanket PolicyInsurance policy providing coverage for multiple properties and/or multiple perils. (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- / VII from A.M. Best Company.
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. .
501.01E | |
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Requirements
Rating requirements do not apply to policies issued
- through State-sponsored insurance programs, or
- by insurers participating in NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. .
For a new policy, you must ensure the insurance carrier has an A.M. Best Company
- general policyholder rating of A- or better, and
- financial size category of VII or better.
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 Borrower'sBorrower'sPerson who is the obligor per the Note. already-in-place policy.
501.01F | |
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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 the:
- shorter term is due to carrier
- non-renewal, or
- cancellation; or
- policy is
- expiring, and
- will be renewed for at least 12 months.
501.01G | |
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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; and
- does not include any conditions that could prevent you or Fannie Mae from receiving the insurance proceeds; and
- has no negative impact on
- the Modifications to Multifamily Loan and Security Agreement (Financing of Insurance Premiums) (Form 6272) was executed.
- the financing agreement:
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.
501.01H | |
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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.
501.01I | |
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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.