Servicing Guide

Published November 10, 2020

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Has Fannie Mae lowered flood insurance coverage requirements from 100% to 80% of the replacement cost of the insurable value of the improvements?

Fannie Mae announced changes to flood insurance coverage requirements on September 24, 2013 (effective for applications dated on or after February 1, 2014), stating there must be a master flood insurance policy in effect for attached condos covering all of the common elements and property (including machinery and equipment that are part of the building) as well as the individual units in the building in an amount that is at least the lower of the following:

  • 80% of the replacement cost, or
  • The maximum insurance available from the National Flood Insurance Program (NFIP) per unit (which is currently $250,000).

Does this mean that Fannie Mae has lowered flood insurance coverage requirements from 100% to 80% of the replacement cost of the insurable value of the improvements? 

No. The policy is specific to the requirements for the master flood insurance policy only. The unit allocation from the master policy still must meet the 1- to 4-unit coverage requirements listed in the Servicing Guide section. The borrower must maintain a supplemental policy to close any gap in coverage if the attached condo project’s master policy meets the minimum project-level requirements above but does not meet the unit- coverage requirements.

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