Compliance

FREDDIE MAC UPDATES PROPERTY INSURANCE SECTIONS OF SELLER/SERVICER GUIDES 

Proctor Loan Protector is providing the following update regarding Freddie Mac and Fannie Mae property insurance requirements. On March 18, 2026, Freddie Mac issued Bulletin 2026-C and 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. Freddie Mac has now incorporated those updates into the Seller/Servicer Guide. The applicable effective dates vary by requirement and are referenced below. Proctor Loan Protector is continuing to monitor for corresponding updates to Fannie Mae’s Selling and Servicing Guides.

Below is a summary of the changes reflected in the updated Freddie Mac Seller/Servicer Guide.

1. One to Four-Unit Property Insurance – Seller Section 4703.2 – Effective Immediately: 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/Servicer to verify RCV by using sources such as a replacement cost estimator or a statement from the property insurer.

2. Master Policy Coverage Sufficiency (Condominiums, PUDs, Coops) – Seller Section 4703.2 – Effective Immediately: Master property insurance policies must provide replacement cost coverage, except that roofs may be insured at ACV.  Seller/Servicers may rely on one of the following options to evidence 100% RCV coverage:

• • 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 – Seller Section 4703.2 – Effective July 1, 2026: If a master policy includes a per unit deductible, it may not exceed $50,000 per unit.

4. HO-6 Coverage – Seller Section 4703.2 – Effective July 1, 2026: 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 – Seller Section 4703.2 – Effective Immediately: HO-6 deductibles may not exceed the greater of 5% of the HO-6 coverage limit or $2,500.

6. Insurance Monitoring & Deficiency Notifications – Servicer Section 8202.1 – Effective January 1, 2027: Servicers must confirm at least annually, or upon renewal or replacement of a policy, that coverage meets at least minimum requirements. If coverage sufficiency cannot be confirmed from the initial evidence of insurance, additional evidence must be obtained.

   As part of that process, if a Servicer must obtain additional evidence of coverage sufficiency for a one- to four-unit property insurance policy, it may monitor the dwelling coverage limit on a renewal policy as an alternative or supplement to other replacement cost evidencing methods. If the dwelling coverage limit has decreased compared to the prior year’s policy, the Servicer may not treat that renewal policy comparison as additional evidence of coverage sufficiency. If reasonable efforts to obtain additional evidence that the policy meets minimum requirements are exhausted and unsuccessful, the Servicer must document those efforts in the mortgage file.

    

   Servicers must also notify borrowers when the Servicer learns that a one- to four-unit property insurance policy is deficient, including deficiencies related to carrier rating, coverage sufficiency, perils, or deductibles, and must document efforts when sufficient evidence cannot be obtained.

7. Annual Borrower Insurance Reminder – Servicer Section 8202.1 – Effective January 1, 2027: Servicers, at least annually, must remind borrowers of their obligation to maintain insurance and to encourage borrowers to review coverage with their insurance provider. The reminder may be included in any existing borrower communication. Servicers can also refer the borrower to information on the Servicer’s website or Freddie Mac’s website.

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.