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Fannie and Freddie Private Flood Update

Fannie Mae and Freddie Mac issued clarifying updates addressing acceptability of private flood insurance directly ahead of the July 1, 2019 effective date of the Federal Agencies regulation.

Fannie and Freddie both announced that although they accept private flood insurance policies as an alternative to those issued through the National Flood Insurance Program (NFIP), in order to be deemed acceptable, the terms and conditions must be at least equal to those provided under an NFIP policy.

As it relates to the Federal Agencies’ joint final rule, Fannie and Freddie addressed that they are not subject to the new federal rules. Regardless of the Federal Agencies’ rule provisions that allow for the use of mandatory or discretionary acceptance, Fannie and Freddie clarify that their existing guidelines, such as the requirement that the private policy provide equivalent terms and conditions of an NFIP policy and the carrier rating requirements, will apply. Fannie specifically called out that it requires a full policy review despite the Federal Agencies’ permissible use of  the compliance aid provision.

To review guidelines, see Fannie Mae Selling Guide B7-3-07, Flood Insurance Coverage Requirements, and Servicing Guide, B-3-01, Flood Insurance Requirements Applicable to All Property Types, and Freddie Mac Guide Section 8202.1 and 8202.3.

Proctor will continue to monitor this topic and provide updates as they develop.