B-3-01: Flood Insurance Requirements Applicable to All Property Types (12/21/2022)

Overview

Refer to Selling Guide B7-3-06, Flood Insurance Requirements for All Property Types for general flood insurance requirements. This section topic describes additional requirements only applicable to servicers.

Servicer Responsibilities Related to Flood Insurance

The following table outlines the servicer’s responsibilities for the maintenance of flood insurance.

✓	The servicer must...
	Ensure the property securing the mortgage loan is adequately protected by flood insurance when required, with no lapses of coverage.
	Ensure the flood insurance premiums are paid. See B-1-01, Administering an Escrow Account and Paying Expenses for additional information.
	Actively monitor all flood maps and community status changes and take appropriate action as changes occur. If a property is remapped into an SFHA, see When a Property’s Flood Zone Status Changes for additional information.
	Provide evidence of flood insurance coverage to Fannie Mae within 10 business days of the date of Fannie Mae’s request.
	Ensure appropriate coverage is in place upon completion of repairs, renovation, or construction for home renovation or energy improvement loans. See Selling Guide B7-3-05, Additional Insurance Requirements for additional information.

Requirements When a Property’s Flood Zone Status Changes

When a property is remapped into an SFHA, the servicer must take the action described in the following table.

If the property is located in a...	Then the servicer must...
participating community under the NFIP	obtain the required coverage within 120 days after the effective date of the remapping even if the borrower refuses to obtain the required coverage or to pay a disputed premium.
non-participating community under the NFIP	work with the borrower to locate a private insurance carrier and obtain the required coverage within 120 days after the effective date of the remapping.

The servicer must follow the procedures in General Expense Reimbursement Requirements in F-1-05, Expense Reimbursement for information related to flood insurance premium reimbursement.

When a property is remapped out of an SFHA, the servicer must not require flood insurance. If the borrower provides a letter from FEMA stating the structure is no longer in an SFHA and requests that the flood insurance be canceled, the servicer must

• cancel the flood insurance, and

• maintain a copy of the letter from FEMA in the individual mortgage loan file.

Determining the Required Coverage Amount for First Lien Mortgage Loans

Refer to Selling Guide  B7-3-06, Flood Insurance Requirements for All Property Types for determining the required coverage amount for first lien mortgage loans.

Determining the Required Coverage Amount for Second Lien Mortgage Loans

If Fannie Mae does not have an interest in the first lien mortgage loan and the property securing a second lien mortgage loan is not covered by a flood insurance policy because the holder of the first lien mortgage loan did not require flood insurance coverage, the servicer must require the borrower to obtain a flood insurance policy with coverage in the amount of the lesser of

• the UPB of all property liens, or

• the maximum coverage available under the NFIP.