Compliance

FANNIE MAE UPDATES PROPERTY INSURANCE SECTIONS OF SELLING GUIDE

Proctor Loan Protector is providing the following update regarding Freddie Mac and Fannie Mae property insurance requirements. On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03, announcing updates to property insurance requirements for one- to four-unit properties, condominium projects, and other project types. Fannie Mae has now incorporated the Selling updates into the Selling Guide. Proctor Loan Protector is continuing to monitor for corresponding updates to Fannie Mae’s Servicing Guide.

A summary of the Fannie Selling Guide changes is provided below.

1. Property Insurance Requirements for One to Four-Unit Properties – Selling Section B7-3-02 Effective Immediately: Coverage sufficiency is determined based on confirming the policy’s loss settlement terms. Property insurance must provide coverage on a replacement cost basis, except that roofs may be insured at ACV. Prior RCV verification methods and documentation requirements have been retired. The Guide no longer includes a requirement formula for insurance coverage to be equal to at least the higher of UPB and 80% of RCV. The Guide also no longer includes language that requires a Seller to verify RCV by using sources such as a replacement cost estimator, or a statement from the property insurer.

 

2. Master Policy Coverage Sufficiency for Project Developments (Condominiums, PUDs, Coops) – Selling Guide Section B7-3-03: Master property insurance coverage must equal at least 100% of the estimated replacement cost value of improvements, including common elements and residential structures, except that roofs may be insured at ACV. Sellers may rely on one of the following options to document that the coverage amount is sufficient:

• The insurance policy includes a Guaranteed Replacement Cost, or equivalent endorsement, or
• The insurance policy includes an Extended Replacement Cost, or equivalent endorsement, or
• The RCV estimate amount utilized by the insurance carrier to determine coverage limits, or
• The project’s insurance risk appraisal, or
• A statement from a property insurer, an independent insurance risk specialist, or other professional with appropriate expertise to make such a determination

 

3. Master Policy (Condominiums, PUDs, Coops) – Per Unit Deductibles – Selling Guide Section B7-3-03: If a master policy includes a per unit deductible, it may not exceed $50,000 per unit.

 

4. HO-6 Coverage – Selling Guide Section B7-3-04: Coverage sufficiency for a unit owners property insurance policy is determined based on the coverage amount and the policy’s loss settlement terms. Borrowers must maintain an HO-6 policy when the master policy does not cover all or part of the unit interior or improvements, or when the master policy includes a per unit deductible. The HO-6 policy must provide coverage in an amount at least equal to the greater of (i) an amount sufficient to restore the unit, or (ii) the amount of the master policy’s per unit deductible.

 

5. HO6 Deductible Limits – Selling Guide Section B7-3-04: HO-6 deductibles may not exceed the greater of 5% of the HO-6 coverage limit or $2,500

 

Proctor Loan Protector continues to actively review these updates and assess potential impacts to insurance tracking processes. If Proctor provides tracking services for your entity, Relationship Managers will reach out as the review progresses to discuss any changes that may be required to your business rules.