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Compliance: Fannie Mae Makes Important Changes to Condo Insurance Requirements
Fannie Mae recently made two important changes to its condominium insurance requirements. The new requirements are effective for all loans with an application date on or after January 1, 2012.
First, Fannie Mae has reversed its prior position and will now accept master or blanket insurance policies for unaffiliated condominium associations or projects. Fannie will accept such master or blanket policies provided they meet various new requirements outlined in the Servicing Guide and Selling Guide.
Servicers will need to obtain the insurance policy as well as all necessary schedules, endorsements, statement of values or other documents to determine whether a policy covers multiple unaffiliated condominium associations and, if it does, if such policy meets Fannie Mae´s requirements.
The second important change involves requirements for HO-6 insurance policies. Fannie Mae previously required that an HO-6 insurance policy must provide coverage in an amount that is no less than 20% of the condominium unit´s appraised value. Fannie Mae now provides that when the HO-6 policy is required by Fannie Mae, the HO-6 policy must provide coverage, as determined by the insurer, which is sufficient to repair the condominium unit to at least its condition prior to the loss.
Fannie Mae also eliminated the use of the term “walls-in” and now addresses when it will require an HO-6 policy with respect to three types of master or blanket condominium insurance policies: “single entity”, “all-in” and “bare walls”.