General Insurance – Applies to All Policies

501.01A	Generally

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
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

Operating Procedures

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	Blanket and Other Policies Covering Multiple Properties

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.

Operating Procedures

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.

501.01C	Risk Retention Groups and Captive Insurance

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
Document/Entity	Description
Certificate of Authority (CA)	State-issued license to an insurance company to conduct business, and includes the date of authority, complete 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. name, and state of domicile.
State Examination Report	Report covering a specific timeframe that: reviews the company's: balance sheet (including assets, liabilities, capital, and surplus); statement of income; investments; premiums; reinsurance assumed and ceded; unpaid losses and loss adjustment expense; and losses and loss adjustment expense incurred; and ascertains its: financial condition; ability to fulfill obligations; and compliance with applicable state laws and regulations.
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. open and paid losses, loss adjustment expense reserves, capital, and surplus.
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: single parent captive (pure captive) - when an insurance subsidiary insures the loss exposures of its parent company or single entity; or group captive – a captive owned by several different companies who are normally from the same industry, and have similar risks.

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	Insurance Carrier Rating

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
You must ensure...	The insurance carrier...
For a new policy	for A.M. Best Company, has a general policyholder rating of A- or better, and financial size category of VI or better; or for Demotech, Inc., has a Financial Stability Rating of A or better.
For an existing policy (at origination or afterward)	for A.M. Best Company, has a general policyholder rating of B++ or better, and complies with the rating requirements for new policies at renewal; or for Demotech, Inc., complies with the rating requirements for new policies.

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	Term

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	Payment of Premium

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.

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	Evidence of Insurance

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
ACORD 28 – Evidence of Commercial Property Insurance (most recent version or, if applicable, the state-approved form), combined with ACORD 25 – Certificate of Liability Insurance. ACORD 75 – Insurance Binder. If an ACORD certificate is unavailable, a joint letter from the Borrower and its licensed insurance broker/agent certifying that all coverages, terms, and conditions meet the requirements. For NFIP flood insurance: the Policy Declaration page; or a copy of the signed application and proof of payment.	An original or duplicate copy of the insurance policy. 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). securing 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 or equal to $10 million, the MBAMBAMortgage Bankers Association Evidence of Insurance - Commercial Property Form; or greater than $10 million, or for blanket policies with multiple layers, duplicate copies of the primary insurance policies, which should: include a letter (signed and dated on company letterhead) from an individual authorized to execute evidence of insurance on behalf of the insurance carriers issuing each policy; state that all policies follow the same terms, conditions, and exclusions as the primary policy, with any differences specified; and for NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. flood insurance, include the Policy Declaration page.

Acceptable Evidence of Insurance

Acceptable Temporary Evidence Forms

Acceptable Permanent Evidence Forms

ACORD 28 – Evidence of Commercial Property Insurance (most recent version or, if applicable, the state-approved form), combined with ACORD 25 – Certificate of Liability Insurance.
ACORD 75 – Insurance Binder.
If an ACORD certificate is unavailable, a joint letter from the Borrower and its licensed insurance broker/agent certifying that all coverages, terms, and conditions meet the requirements.
For NFIP flood insurance:
- the Policy Declaration page; or
- a copy of the signed application and proof of payment.

An original or duplicate copy of the insurance policy.
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). securing 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 or equal to $10 million, the MBAMBAMortgage Bankers Association Evidence of Insurance - Commercial Property Form; or
- greater than $10 million, or for blanket policies with multiple layers, duplicate copies of the primary insurance policies, which should:
  - include a letter (signed and dated on company letterhead) from an individual authorized to execute evidence of insurance on behalf of the insurance carriers issuing each policy;
  - state that all policies follow the same terms, conditions, and exclusions as the primary policy, with any differences specified; and
  - for NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. flood insurance, include the Policy Declaration page.

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	Insurance Exceptions

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.