When Fannie Mae purchases a mortgage loan that combines construction and permanent financing into a single transaction before the construction of the property improvements is completed, builder’s risk/construction site insurance equal to the original mortgage loan amount must be obtained.
Once the improvements are complete or the borrower occupies the property, whichever occurs first, Fannie Mae’s standard applicable insurance requirements apply. See Chapter B-2, Property Insurance Requirements and Chapter B-3, Flood Insurance Requirements for additional information.
Additional Information: https://www.fanniemae.com/content/guide/servicing/b/4/02.html