Servicing Guide

Published November 10, 2020

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Is it acceptable to have an individual property insurance policy on a condominium unit versus requiring the project to maintain a master property policy?

Is it acceptable to have an individual property insurance policy (e.g., HO3 policy) to cover a condominium unit versus requiring the project to maintain a master property policy?

Fannie Mae generally does not require individual insurance policies for a condo unit securing a first mortgage or for a co-op share loan. However, if the legal documents for the project allow for unit insurance policies for each first mortgage in lieu of a master policy, Fannie Mae will purchase loans with individual unit insurance policies that meet the requirements in Selling Guide Section B7-3-06, Evidence of Property Insurance, and Selling Guide chapter B7– 3, Property and Flood Insurance.

Common element coverage must also be documented through a master policy.  If the insurable value of the common elements (e.g., entrance signage, lamp posts, etc.) is minimal – for example, the potential policy limit is less than or very near the cost of the standard deductible, lenders may waive the need to document coverage.   

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If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Guide Resources

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