Servicing Guide

Published December 12, 2018

B-3-01: Flood Insurance Requirements Applicable to All Property Types (12/12/2018)

Refer to Selling Guide B7-3-07, Flood Insurance Requirements for Seller/Servicers for general flood insurance requirements. This section describes requirements only applicable to servicers.

This topic contains the following:

  • Servicer Responsibilities Related to Flood Insurance

  • Requirements When a Property’s Flood Zone Status Changes

  • Determining Minimum Coverage Amounts

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.

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 canceled, the servicer must

  • cancel the flood insurance, and

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

Determining Minimum Coverage Amounts

If Fannie Mae does not have an interest in the first lien mortgage loan and the property securing a second lien mortgage loan is not covered by a flood insurance policy because the holder of the first lien mortgage loan did not require flood insurance coverage, the servicer must require the borrower to obtain a flood insurance policy with coverage in the amount of the lesser of

  • the UPB of all property liens, or

  • the maximum coverage available under the NFIP.

Related Announcements

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

Announcements Issue Date
Announcement SVC-2018-09 December 12, 2018
Announcement SVC–2015–11 August 12, 2015