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

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). must be covered by compliant property insurance and liability insurance for the term of 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. .  If the BorrowerBorrowerPerson who is the obligor per the Note. fails to maintain any required insurance on 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). , you must obtain the required coverage.

All insurance policies must:

  • list the BorrowerBorrowerPerson who is the obligor per the Note. as a named insured;
  • be written on a per occurrence basis, except for earthquake insurance and professional liability Insurance, which may be written on a per occurrence or claims-made basis;
  • include a provision requiring the carrier to notify each 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, unless the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. expressly require the BorrowerBorrowerPerson who is the obligor per the Note. to notify the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. promptly of any notice of cancellation it receives;
  • except for professional liability insurance, name Fannie Mae as Additional Insured on all liability insurance and excess/umbrella insurance; and
  • contain a mortgagee clause and loss payable clause for the benefit of Fannie Mae, its successors, and assigns.

All property insurance policies must use Replacement Cost valuation, however, coverage for roofs may use Actual Cash Value or Replacement Cost valuation.

Guidance

All requirements apply to the review you perform before closing as well as to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. ’s annual compliance review.

You are expected to obtain the advance cancellation notice for the benefit of each Mortgagee and Additional Insured from the insurance carriers whenever possible.  When that is not possible, you should ensure that the final Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. have not been modified in any manner that limits

  • the BorrowerBorrowerPerson who is the obligor per the Note. ’s obligation to provide prompt notice to the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. 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. as a result of any failure to maintain all insurance coverages required by the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .  

Below is an acceptable mortgagee clause.

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 you are not able to obtain the advance cancellation notice from any insurance carrier, you must retain evidence of your attempts to obtain such notice provisions in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .