What are Fannie Mae’s requirements concerning “gap coverage” in lenders’ title insurance policies?
The Selling Guide Chapter B7-2 requires a loan title insurance policy that satisfies Fannie Mae’s requirements, written on the 2006 ALTA loan title insurance form or local equivalent, be obtained by a lender before a mortgage loan is sold to Fannie Mae.
The 2006 ALTA form includes “gap coverage” in Covered Risk 14 for matters arising between the date a mortgage loan is closed and when the mortgage is recorded. Similarly, if title insurance is obtained on an alternate form, the Selling Guide requires coverage be provided for the period between the closing date of the loan and the date when the mortgage is recorded.
Lenders must continue to ensure that no unacceptable title impediments or policy exceptions exist in accordance with B7-2-05, Title Exceptions and Impediments.
For more information, refer to the published Lender Letter LL-2020-03, Impact of COVID-19 on Originations.