Lenders should inform borrowers that they can only purchase property insurance policies that contain such restrictions or exclusions if they are able to obtain a separate policy or endorsement from another commercial insurer that provides adequate coverage for the limited or excluded danger, or from a state-established insurance pool; to cover limitations or exclusions. Fannie Mae does not accept property insurance that limits or excludes coverage for storms, hurricanes, hail damage, or other hazards normally included in the extended coverage (in whole or in part). See Service Guide, B-2-01, Property Insurance for All Types of Property, for additional duty officer responsibilities related to property insurance for second lien loans. B7-3-03, Determining the Amount of Property Insurance Coverage Required provides a formula for determining the amount of property insurance coverage typically required for an initial mortgage. While the property insurance requirement for most home renovation or construction loans is initially based on the “east” value of the property, the amount of coverage may need to be increased once the renovation or construction work is complete to ensure that Fannie Mae`s standard coverage requirement is met. The maximum deductible for insurance that covers a property (including common elements in a PUD, condominium or co-op project) that guarantees a loan is 5% of the nominal amount of the policy. If a policy provides for a separate deduction for wind losses (either in the policy itself or in a separate confirmation), this deductible cannot exceed 5% of the nominal amount of the policy. Property insurance that covers loans to Fannie Mae must protect against loss or damage caused by fire and other hazards covered by standard extended coverage. Coverage must provide for the settlement of claims on the basis of replacement costs. Extended coverage must include at least wind, hurricanes, riots (including riots), smoke, hail, and damage caused by aircraft, vehicles, or explosions. For security properties in Guam, typhoon coverage is required. Some long-term construction mortgages covered by the builder`s risk insurance during the construction period do not require property insurance coverage, although Fannie Mae`s standard property insurance requirements apply to mortgages once the borrower lives on the property or construction is complete. the balance of the outstanding principal of the mortgage, provided that it is at least equal to the minimum amount – 80% of the insurable value of the improvements – necessary to compensate for the damage or loss on the basis of replacement costs.
If this is not the case, it is necessary to achieve coverage that provides the minimum amount required. .