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Hazard and Flood Insurance Updates

Fannie and Freddie Update Insurance Requirements

Fannie Mae and Freddie Mac issued announcements on February 7th to provide updated and clarifying guidelines for lenders and servicers regarding property insurance requirements and other related responsibilities, along with other various miscellaneous updates.

The updated guidance provides:

  • Clarification that the adequacy of insurance coverage must be verified by the lender or servicer as of the current property insurance policy effective date and that lenders and servicers can use various methods to make the verification.
  • Policies that limit, depreciate, or settle losses other than on a replacement cost basis are unacceptable.
  • Updated requirements for condominium insurance policies.


Lenders and servicers are encouraged to comply with these clarified property insurance requirements as soon as possible but lenders must adhere to the property insurance requirements for all loans with application dates on or after June 1, 2024, and servicers must adhere to the property insurance requirements for all loans with insurance policies that are renewed or obtained on or after June 1, 2024.

Note: Other revisions in the Fannie and Freddie announcements should be reviewed for specific effective dates relating to each update.

We encourage all clients to review the announcements and guides below for additional information:


Fannie – NFIP Lapse Requirements

Fannie also updated Selling Guide Section B7-3-06, Flood Insurance Requirements, related to selling and servicing loans requiring flood insurance during a lapse of the National Flood Insurance Program (NFIP).

Fannie Mae clarified that for the duration of an NFIP lapse, a lender may sell a loan to Fannie Mae where flood insurance is otherwise required without an active flood insurance policy provided specific requirements outlined in the guide are met. The updated requirements can be viewed here.


NFIP Proposes New Homeowner Flood Policy Form

The NFIP recently proposed a rule introducing a new Homeowner Flood Form (HFF) and five accompanying endorsements aimed at enhancing flood insurance coverage for homeowners. Some key points from the proposed rule include:

  • The HFF will replace the current Dwelling Form and is designed to be more personalized and customizable than the existing Standard Flood Insurance Policy.
  • By simplifying coverage terms and reducing complexity, the new HFF aims to alleviate confusion faced by homeowner policyholders.
  • Notably, FEMA proposes to shift the default loss settlement from actual cash value to replacement cost value. This change is intended to help policyholders recover more effectively from losses.

Click here to read more on the proposed rule. Comments are due on or before April 8, 2024. Comments can be submitted via the Federal eRulemaking Portal:

Proctor Loan Protector will continue to monitor these topics and provide updates as they develop.