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What must be done when a property securing a Fannie Mae mortgage loan experiences an insured loss event?

When a property securing a mortgage loan experiences an insured loss, the servicer must ensure the proof of loss claim is filed within the time period specified in the insurance policy and monitor the disbursement of insurance loss proceeds (see Disbursing Insurance Loss Proceeds Based on the Mortgage Loan Status and the Borrower’s Intent for additional information).

Note: If the servicer is unable to establish contact with the borrower, the servicer must contact the insurance carrier to determine whether the borrower has filed the proof of loss claim. If the borrower has not filed the claim, the servicer must file a proof of loss claim under the standard mortgagee clause and collect the insurance loss proceeds on Fannie Mae's behalf.

If a property inspection reveals an insurable loss event and the proof of loss claim is not filed, is denied, or is curtailed due to the servicer’s failure to file a timely claim, the servicer must make Fannie Mae whole for any losses relating to the property damage, expenses, or fees Fannie Mae incurs.

Additional responsibilities depends upon whether the property can be legally rebuilt, as described in the following table.

If… Then the servicer must…
the property cannot be legally rebuilt

use any insurance loss proceeds to reduce the outstanding mortgage loan debt.

the property can be legally rebuilt follow the instructions in Responsibilities for All Properties that Can Be Legally Rebuilt and determine the appropriate actions based on the status of the mortgage loan at the time of the loss event, as described in Disbursing Insurance Loss Proceeds Based on the Mortgage Loan Status and the Borrower's Intent.

For more information please see: B-5-01, Insured Loss Events.

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