Fannie Mae changes to Condominium and Cooperative Project Policies
The Fannie Mae announcement of December 16th 2008 included major insurance changes summarized below. Banks must verify that hazard insurance for all condominium projects, covers fixtures, equipment, and other personal property inside individual units if they will be financed by the mortgage. (announcement 08-34)
walls-in" coverage -Fannie Mae now requires that the borrower obtain a "walls-in" coverage policy(commonly known as HO-6 policy) unless the lender can document that the master policy provides the same interior unit coverage.
improvements and betterment coverage -The master policy must include replacement coverage for improvements and betterment to cover any improvements that the borrower may have made to the unit. The HO-6 insurance policy must provide coverage in an amount that is no less than 20 percent of the condominium unit's appraised value.
Condominium Association Project Insurance Clarifications
Fannie Mae is clarifying the requirements for master or blanket project insurance (hazard, windstorm, and flood) for condominiums. The following are not permitted:
blanket policy that covers multiple unaffiliated condominium associations or projects,
self insurance arrangement whereby the owners' association
is self insured or has banded together with other unaffiliated
associations to self insure all of the general and limited common elements of the various associations.
As a reminder, condominium association project insurance must cover 100 percent of the insurable replacement cost of the project improvements, including the individual units in the
condominium project. Coverage does not need to include land, foundations, excavations, or other items that are usually
excluded from insurance coverage.
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