Servicer Responsibilities Related to Flood Insurance

The following table outlines the servicer’s responsibilities for the maintenance of flood insurance.

The servicer must...

Ensure the property securing the mortgage loan is adequately protected by flood insurance when required, with no lapses of coverage.

Ensure the flood insurance premiums are paid. See B-1-01, Administering an Escrow Account and Paying Expenses for additional information.

Actively monitor all flood maps and community status changes and take appropriate action as changes occur. If a property is remapped into a SFHA, see When a Property’s Flood Zone Status Changes for additional information.

Provide evidence of flood insurance coverage to Fannie Mae within 10 business days of the date of Fannie Mae’s request.

Increase the coverage for home renovation or construction mortgage loans, if necessary, when the renovation or construction work is completed or the borrower occupies the property. Also see B-4-02, Builder’s Risk/Construction Site Insurance for additional information.

Determining If a Property Requires Flood Insurance

Flood insurance coverage is required when a mortgage loan is secured by a property located in an SFHA. The following table describes how to evaluate a property to determine if 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.

the principal structure on a property securing the mortgage loan is not located in an SFHA, but a residential detached structure attached to the land that serves as part of the security for the mortgage loan is located within the SFHA

is required for the residential detached structure.

the principal structure on a property securing the mortgage loan is not located in an SFHA, but a non-residential detached structure attached to the land that serves as part of the security for the mortgage loan is located within the SFHA

is not required.

the principal structure on a property securing the mortgage loan is not located in an SFHA, but a detached structure attached to the land that does not serve as part of the security for the mortgage loan is located within the SFHA

is not required.

Properties Located in the Coastal Barrier Resources System or Otherwise Protected Area

If a property securing a mortgage loan is located within the Coastal Barrier Resource System or is within an Otherwise Protected Area, flood insurance is required. If the property is not eligible for federal flood insurance, private flood insurance is acceptable.

The flood insurance carrier must meet Fannie Mae’s minimum rating requirements as specified in Property Insurance Carrier Rating Requirements in B-2-01, Property Insurance Requirements Applicable to All Property Types. The amount of the flood insurance required and the deductible amount must adhere to Fannie Mae’s flood insurance requirements based on the property type.

Communities that Participate in the Emergency Program of the NFIP

For communities that participate in the Emergency Program of the NFIP, 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 in situations where the NFIP Emergency Program only provides limited coverage.

Requirements When a Property’s Flood Zone Status Changes

When a property is remapped into an SFHA, the servicer must take the action described in the following table.

If the property is located in a... Then the servicer must...

participating community under the NFIP

obtain the required coverage within 120 days after the effective date of the remapping even if the borrower refuses to obtain the required coverage or to pay a disputed premium.

non-participating community under the NFIP

work with the borrower to locate a private insurance carrier and obtain the required coverage within 120 days after the effective date of the remapping.

The servicer must follow the procedures in General Expense Reimbursement Requirements in F-1-05, Expense Reimbursement for information related to flood insurance premium reimbursement.

When a property is remapped out of an SFHA, the servicer must not require flood insurance. If the borrower provides a letter from FEMA stating the structure is no longer in an SFHA and requests that the flood insurance be cancelled, the servicer must

  • cancel the flood insurance, and

  • maintain a copy of the letter from FEMA in the individual mortgage loan file.

Acceptable Flood Insurance Policies

Flood insurance must be in one of the following forms:

  • a standard policy issued under the NFIP,

  • a policy that meets NFIP requirements, such as those issued by licensed property and casualty insurance companies authorized to participate in the NFIP’s “Write Your Own” program; or

  • a policy issued by a private insurer as long as

A Policy Declaration page is acceptable evidence of flood insurance.

Maximum Allowable Deductible Requirements

The deductible must be no greater than the NFIP maximums based on the property type.

Related Announcements

The following table provides references to Announcements that are related to this topic.

Announcements Issue Date
Announcement SVC–2015–11 August 12, 2015