Compliance

FANNIE MAE UPDATES PROPERTY INSURANCE SECTIONS OF SERVICING GUIDE

Proctor Loan Protector is providing the following update regarding 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. On August 12, 2026, Fannie Mae issued Servicing Guide Announcement SVC-2026-05, incorporating the related requirements applicable to servicers into the Servicing Guide.

A summary of the Fannie Mae Servicing Guide changes is provided below. Servicers are encouraged to implement the changes from Lender Letter LL-2026-03immediately but must do so by January 1, 2027.

1. Property Insurance Requirements Applicable to All Property Types – Servicing Guide Section B-2-01– Implementation Required by January 1, 2027:
   1. Confirm that the property insurance policy meets Fannie Mae requirements for the applicable property type, as described in B-2-02, Property Insurance Requirements for One- to Four-Unit Properties; B-2-03, Master Property Insurance Requirements for Project Developments; and B-2-04, Property Insurance Requirements for Individual Units in a Project Development. See Servicing Guide Sections B-2-01 through B-2-04.
   2. Obtain lender-placed insurance in response to notification that coverage is being cancelled, nonrenewed, or has lapsed, in accordance with B-6-01 , Lender Placed Insurance Requirements.
   3. At least annually, remind borrowers of their responsibility to maintain insurance on the property and recommend that they contact their insurance provider to review their coverage. The reminder may be included in or with another borrower communication and may refer the borrower to applicable borrower-facing insurance information on Fannie Mae’s or the servicer’s website. The servicer may use any outreach method permitted by applicable law.
2. Property Insurance Requirements for One- to Four-Unit Properties – Servicing Guide Section B-2-02 – Implementation Required by January 1, 2027: The servicer must follow Fannie Mae’s minimum monitoring requirements based on whether the policy is new or a renewal:
   1. New Policy: The servicer must confirm that the property insurance policy meets the insurer rating requirements described in Selling Guide B7-3-01 and the required perils, coverage sufficiency, and maximum deductible requirements described in Selling Guide B7-3-02. Property insurance must provide coverage on a replacement cost basis, except that roofs may be insured at actual cash value (ACV). Prior replacement cost value (RCV) verification methods and documentation requirements have been retired. The Guide no longer includes the prior coverage formula based on the higher of the unpaid principal balance (UPB) and 80% of RCV, or language requiring a seller/servicer to verify RCV using specified sources, such as a replacement cost estimator or a statement from the property insurer.
   2. Renewal Policy: At least annually, the servicer must confirm that the property insurance policy meets the requirements described above for new policies. If, based on the initial evidence of insurance provided, the servicer is unable to confirm whether the policy meets the replacement cost coverage requirements in Selling Guide B7-3-02, the servicer may determine whether the policy coverage amount under review has decreased from the last known coverage amount (LKCA) and take the following action:
      1. If the policy coverage amount has not decreased from the LKCA, any additional action the servicer takes to confirm compliance with the replacement cost coverage requirements is at its discretion.
      2. If the policy coverage amount has decreased from the LKCA, or the servicer cannot determine the LKCA, the servicer must take additional steps it deems appropriate to confirm that the policy meets the replacement cost coverage requirements in Selling Guide B7-3-02 and document its efforts in the individual mortgage loan file.
   3. Notice of Coverage Insufficiency: Upon identifying that a property insurance policy does not comply with one or more of the above requirements, the servicer must notify the borrower of the insufficiency.
   4. The servicer must have procedures describing the methods used to adhere to the minimum monitoring requirements. If the servicer monitors for decreases in policy coverage amounts, the procedures must also describe the monitoring method, the subsequent steps used to confirm compliant coverage, and, as applicable, the steps used to attempt to resolve a noncompliant policy.

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, your Relationship Manager will reach out as the review progresses to discuss any changes that may be required to your business rules.