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 a per occurrence basis, except the following, which may be written on a per occurrence or claims-made basis:
    • 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 valuation; however, coverage for roofs may use
    • Actual Cash Value, or
    • Replacement Cost valuation.

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.