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 structure 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 Standard 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 communities 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.
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 requirements for insurance underwriters described in B7-3-01, Property Insurance Requirements for Insurers.
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 Project 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.
When originating a second lien mortgage for delivery to Fannie Mae, the lender must include all property liens when determining the appropriate flood insurance coverage for the subject loan. All other requirements applicable to first mortgages must also be met.
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|
Individual condo units:
Stand-alone flood insurance dwelling policies for an attached individual condo unit are not acceptable. A master condo flood insurance policy must be maintained by the HOA, subject to the coverage requirements below. (For detached units, refer to the requirements described in Coverage for First Mortgages above.)
The lender must verify that the HOA maintains a Residential Condominium Building Association Policy or equivalent private flood insurance coverage for the subject unit’s building if it is located in an SFHA. The policy must cover all of the common elements and property (including machinery and equipment that are part of the building), as well as each of the individual units in the building.
The master flood insurance policy must be at least equal to the lower of
If the condo project master policy meets the minimum coverage requirements above but does not meet the one- to four-unit coverage requirements (described in Coverage for First Mortgages), a supplemental policy may be maintained by the unit owner for the difference.
The contents coverage for the building should equal 100% of the insurable value of all contents owned in common by association members.
If the condo project has no master flood insurance policy or if the master flood insurance policy does not meet the requirements above, mortgages securing units in that project are not eligible for delivery to Fannie Mae.
Note: DU Refi Plus and Refi Plus loans secured by units in a condo project are not required to meet the flood insurance requirements for master flood insurance policies stated in this section. Rather, if no master policy is in place, a stand-alone dwelling policy may be maintained by the unit owner to meet the full one- to four-unit requirements. If the master policy is deficient (by any amount), a supplemental policy may be maintained by the unit owner for the difference between the master policy and the one- to four-unit requirements.
Individual co-op units:
Fannie Mae does not require flood insurance for individual co-op units.
The co-op corporation must have flood insurance coverage for each building that is located in an SFHA. The policy must cover the building and any common elements and property (including machinery and equipment) that are owned in common by the shareholders of the co-op corporation. The lower of 100% replacement cost or the maximum coverage available under the applicable NFIP must be maintained.
PUD units (attached and detached):
Fannie Mae requires the same flood insurance for individual PUD units that is required for other one- to four-unit properties (described in Coverage for First Mortgages above). A stand-alone dwelling policy may be maintained to meet these requirements.
When the lender (or a flood zone determination company) determines that a property is located in the Coastal Barrier Resources 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 community 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.
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.
The following table describes the special feature code requirements applicable to flood insurance.
|Structure Location and Status of Flood Insurance Coverage||Required Special Feature Code|
||SFC 170 Flood Insurance — Special Flood Hazard Area|
||SFC 175 Flood Insurance — Not a Special Flood Hazard Area|
Note: In addition to these criteria, this special feature code also applies if there is a non-residential detached structure attached to the land for which any part is in an SFHA.
|SFC 180 No Flood Insurance|
The table below provides references to the Announcements that have been issued that are related to this topic.
|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|