Introduction
This topic contains information on Fannie Mae's flood insurance coverage requirements, including:
- General Requirements
- Acceptable Flood Insurance Policies
- Coverage for First Mortgages
- Coverage for Second Mortgages
- Requirements for Project Developments
- Properties Located in the Coastal Barrier Resources System or in an Otherwise Protected Area
- Maximum Allowable Deductibles
- Delivery Requirements
General Requirements
The lender must ensure that any flood insurance required for the security property is in place. Fannie Mae requires flood insurance for any property that has a residential building, dwelling, structure, or improvement situated in a Special Flood Hazard Area (SFHA) that
- has federally mandated flood insurance purchase requirements, or
- is located in the Coastal Barrier Resources System or Otherwise Protected Area. (See Properties Located in the Coastal Barrier Resources System or in an Otherwise Protected Area below for further detail.)
Flood insurance coverage is required for all residential buildings on the mortgaged premises if any part of the structure is located within an SFHA. If two or more residential structures are located on a security property (for example, a principal struc- ture and a guest house), all structures with any part in an SFHA must be covered by adequate flood insurance. (For the purpose of Fannie Mae's flood insurance requirements, the "principal structure" is the primary residential structure on the security property.)
The following table describes when flood insurance is required.
If... |
Then flood insurance... |
any part of the principal structure on a property securing the mortgage loan is located in an SFHA, |
is required on the principal structure. |
a non-residential detached structure attached to the land on a property securing the mortgage loan has any part located in an SFHA, |
is not required on the non-residential detached structure. |
a residential detached structure on a property securing the mortgage loan has any part located in an SFHA, |
is required on the residential detached structure. |
The lender must determine whether or not the structures on the security property are located in an SFHA by using the Stan- dard Flood Hazard Determination form endorsed by FEMA as mandated by federal flood insurance purchase requirements. SFHAs are shaded on a Flood Hazard Boundary Map and designated on a Flood Insurance Rate Map (FIRM). All flood zones beginning with the letter "A" or "V" are considered SFHAs.
If the lender determines that a principal and/or residential detached structure is located in an SFHA but the community does not participate in the National Flood Insurance Program (NFIP), the mortgage is not eligible for purchase by Fannie Mae.
For communities that participate in the Emergency Program of the NFIP, mortgage loans secured by properties in those com- munities are eligible for purchase by Fannie Mae provided that the flood insurance coverage meets the higher NFIP Regular Program limits (available on FEMA's website). Because the NFIP Emergency Program provides only limited coverage, the borrower must obtain private insurance or a supplemental private policy in conjunction with an NFIP Emergency Program policy that fully meets Fannie Mae's flood insurance coverage requirements (described below).
Fannie Mae will not require flood insurance on a principal or residential detached structure if the borrower obtains a letter from FEMA stating that its maps have been amended so that the structure is no longer in an SFHA.
Acceptable Flood Insurance Policies
Flood insurance should be in the form of the standard policy issued under the NFIP or by a private insurer. The terms and conditions of the flood insurance coverage must be at least equivalent to the terms and conditions of coverage provided under the standard policy of the NFIP for the appropriate property type. The Policy Declaration page of a policy is acceptable evidence of coverage.
The amount of flood insurance provided by the NFIP or by a private insurer must meet Fannie Mae's minimum coverage requirements for the appropriate property type. In addition, private carriers must meet Fannie Mae's minimum rating require- ments for insurance underwriters described in B7-3-01, Property Insurance Requirements for Insurers (11/03/2015).
Coverage for First Mortgages
The minimum amount of flood insurance required for most first mortgages secured by one- to four-unit properties, individual PUD units, and certain individual condo units (such as those in detached condos, townhouses, or rowhouses) is the lowest of:
- 100% of the replacement cost of the insurable value of the improvements;
- the maximum insurance available from the NFIP, which is currently $250,000 per dwelling; or
- the unpaid principal balance of the mortgage.
Additional requirements for units in attached condo projects, co-op projects, and PUDs are detailed in Requirements for Proj- ect Developments below.
For a HomeStyle Renovation mortgage, the flood insurance coverage should be in an amount equal to the "as is" value of the property. This coverage must be increased, if necessary, following completion of the renovation work to ensure that the coverage meets Fannie Mae's standard coverage requirements.
Coverage for Second Mortgages
When originating a second lien mortgage for delivery to Fannie Mae, the lender must include all property liens when deter- mining the appropriate flood insurance coverage for the subject loan. All other requirements applicable to first mortgages must also be met.
Requirements for Project Developments
If a first mortgage is secured by a unit in an attached condo or co-op project and any part of the improvements are in an SFHA, the lender must verify that the HOA or co-op corporation maintains a master or blanket policy of flood insurance and provides for premiums to be paid as a common expense.
Project Type |
Coverage Requirements |
Condo |
Individual condo units:
|
Co-op |
Individual co-op units: |
PUD |
PUD units (attached and detached): |
Properties Located in the Coastal Barrier Resources System or in an Otherwise Protected Area
When the lender (or a flood zone determination company) determines that a property is located in the Coastal Barrier Re- sources System (CBRS) or in an Otherwise Protected Area (OPA), flood insurance is required and the lender must verify that the flood insurance policy meets Fannie Mae's requirements. A mortgage in a non-participating CBRS or OPA commu- nity is eligible only if the unit is not located in an SFHA and will require flood insurance to be eligible for delivery to Fannie Mae.
Fannie Mae will accept flood insurance policies from either private insurance carriers or from the NFIP. The amount of flood insurance required must meet Fannie Mae's minimum coverage requirements for the appropriate property type. The carrier must meet Fannie Mae's minimum rating requirements for insurance underwriters.
Maximum Allowable Deductibles
Deductibles for master project and individual dwelling flood insurance policies must meet NFIP requirements for the type of improvements insured unless state law requires a higher maximum deductible amount. This requirement applies to both NFIP and private policies.
Delivery Requirements
The following table describes the special feature code requirements applicable to flood insurance.
Structure Location and |
Required Special Feature Code |
|
|
|
|
Structure Location and |
Required Special Feature Code |
|
|
Related Announcements
The table below provides references to the Announcements that have been issued that are related to this topic.
Announcements |
Issue Date |
Announcement SEL-2016–03 |
March 29, 2016 |
Announcement SEL-2014–16 |
December 16, 2014 |
Announcement SEL-2014–10 |
July 29, 2014 |
Announcement SEL-2013–07 |
September 24, 2013 |
Announcement SEL-2013–03 |
April 9, 2013 |
Announcement SEL-2012–07 |
August 21, 2012 |
Announcement 09-28 |
August 21, 2009 |