B-6-01, Lender-Placed Insurance Requirements (10/14/2015)
Introduction
This topic contains the following:
- Servicer Responsibilities Related to Lender-Placed Insurance
- Lender-Placed Insurance Deductible Requirements
Servicer Responsibilities Related to Lender-Placed Insurance
If the servicer cannot obtain evidence of acceptable property or flood insurance for a property securing a mortgage loan, the servicer must obtain lender-placed insurance in compliance with Fannie Mae’s insurance requirements. The following table provides the servicer’s responsibilities related to lender-placed insurance.
| ✓ | The servicer must... |
|---|---|
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Only issue lender-placed insurance coverage after it makes unsuccessful attempts to obtain evidence of insurance in accordance with applicable law. |
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Not use a lender-placed insurance carrier that is an affiliated entity, as defined below, for a lender-placed insurance policy, including any captive insurance or reinsurance arrangements with an affiliated entity. |
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Exclude any lender-placed insurance commissions or payments (including any incentive based compensation regardless of its designation as commission, bonus, fees, or other types of payments from the servicer’s lender-placed insurance carrier; for example, underwriting bonuses or other payments based on insurance loss ratios) earned on a lender-placed insurance policy by the servicer, broker, or any affiliated entity, as defined below, from the lender-placed insurance premiums charged to the borrower or submitted for reimbursement from Fannie Mae. |
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Provide copies of its lender-placed insurance policy, including any other contractual arrangements between the servicer and a lender-placed insurance carrier, upon Fannie Mae’s request. |
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Provide any documentation or data relating to its lender-placed insurance activities and lender-placed insurance coverage requested by Fannie Mae within 30 days of Fannie Mae’s request. |
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In compliance with applicable law:
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For purposes of lender-placed insurance, an affiliated entity is defined as
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an entity owned or controlled, in whole or in part, by the servicer including, but not limited to, a subsidiary or joint venture of the servicer;
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an entity that owns or controls, in whole or in part, the servicer (for example, the parent company of the servicer); or
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an entity under common ownership or control with the servicer (for example, two subsidiaries of the same parent company).
An affiliated entity does not include a publicly traded company where the servicer owns less than 5% of its stock.
Lender-Placed Insurance Deductible Requirements
The servicer must set the deductible for a lender-placed property insurance policy based on the following table.
| If the coverage amount is... | Then the required deductible is... |
|---|---|
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less than $100,000 |
$1,000. |
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from $100,000 up to and including $250,000 |
$2,000. |
|
greater than $250,000 |
$2,500. |
Note: Lender-placed flood insurance, and lender-placed wind- or hail-only insurance policies are excluded from this requirement.
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