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Earthquake Insurance and Escrow Waiver Requirements

Fannie Mae Earthquake Insurance Requirements

Following a routine assessment of policies and a study of perils, Fannie Mae has removed from the Servicing Guide earthquake insurance requirements for properties securing a mortgage loan in Puerto Rico and in Guam. Accordingly, Guide Section B-4-01, Earthquake or Typhoon Insurance has been deleted.

Typhoon insurance requirements for properties in Guam will remain in effect and have been relocated to Servicing Guide Section B-2-01, Property Insurance Requirements Applicable to All Property Types. The changes take effect immediately.

To review Fannie Mae’s Bulletin (SVC-2020-07) in its entirety, click here.

Freddie Mac Escrow Waiver Requirements

Effective February 1, 2021, servicers are required to have a written policy that governs when an escrow account may be waived. The intent is to make the process more equitable for all similarly situated borrowers’ requests.

Guide Section 8201.1 reflects that when a borrower does not escrow and the servicer becomes aware of nonpayment of any expense otherwise payable from an escrow account, and the borrower is not able to provide evidence of payment within 30 days, then, when allowed by applicable law, the servicer must establish escrow and begin to collect toward future expenses. Despite this requirement, if the servicer does not believe a force-placed escrow account is warranted, based on the circumstances and the borrower’s history, then the servicer may consider an exception. In cases where the servicer believes an exception is warranted, even though the borrower did not satisfy the requirements of Section 8201.1(c), the servicer must send an exception request to Freddie Mac for review via Workout Prospector.

To review the associated Freddie Mac Bulletins, 2020-39 and 2020-46, please follow the links provided.