B-2-02, Property Insurance Requirements for One- to Four-Unit Properties (12/21/2022)

This topic describes additional requirements only applicable to servicers. Refer to Selling Guide B7-3-02, Property Insurance Requirements for One- to Four-Unit Properties for property insurance requirements for mortgage loans secured by a one- to four-unit property, including

• coverage requirements,
• determining the required coverage amount for first lien mortgage loans, and
• deductible requirements.

Refer to Selling Guide B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements for the applicable requirements for mortgage loans secured by a one- to four-unit property.

When the existing coverage for a property that secures a second lien mortgage does not provide coverage equal to the lesser of 100% of the replacement cost value of the property improvements or the combined unpaid principal balance of the first-lien and second-lien mortgages (as long as that equals at least 80% of the replacement cost value of the improvements), the servicer must require the borrower to obtain appropriate endorsements to bring the coverage in line with Fannie Mae's requirements. A copy of any endorsements should be sent to the first-lien mortgage servicer.

For a second lien mortgage loan, the mortgagee clause in the property insurance policy for the first lien mortgage loan must be amended to recognize the second lien mortgage loan and to clearly set out Fannie Mae's interest in the policy coverage.