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B-3-01, Flood Insurance Requirements Applicable to All Property Types (02/14/2024)

Introduction
This topic contains the following:

Overview

Refer to Selling Guide B7-3-06, Flood Insurance Requirements for All Property Types for general flood insurance requirements. This topic describes additional requirements only applicable to servicers.


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 (see Requirements During a National Flood Insurance Program Lapse for servicing mortgage loans impacted by a lapse of the NFIP).

 

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

 

Ensure appropriate coverage is in place upon completion of repairs, renovation, or construction for home renovation or energy improvement loans. See Selling Guide B7-3-05, Additional Insurance Requirements 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 ReimbursementF-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 the Required Coverage Amount for First Lien Mortgage Loans

Refer to Selling Guide B7-3-06, Flood Insurance Requirements for All Property Types for determining the required coverage amount for first lien mortgage loans.


Determining the Required Coverage Amount for Second Lien Mortgage Loans

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 required 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.


Requirements During a National Flood Insurance Program Lapse

Refer to Selling Guide B7-3-06, Flood Insurance Requirements for All Property Types for additional requirements that must also be met in the event of a lapse of the NFIP. 

The following table lists the servicer's responsibilities for impacted mortgage loans during a lapse of the NFIP.

 

The servicer must continue to...
  Collect flood insurance premiums and remit payment to the appropriate insurance company when the NFIP has been reauthorized.
  Track properties securing mortgage loans for which a new policy, an increase in coverage, or renewal of an existing policy would have occurred during the lapse.
  Take all steps (as permitted by applicable law) necessary to facilitate the issuance of coverage once the lapse has ended.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SVC-2024-01 February 14, 2024
Announcement SVC-2022-08 December 21, 2022
Announcement SVC-2021-09 December 8, 2021