Selling Guide

Published December 16, 2020

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What are the eligibility requirements for properties affected by a disaster?

Property Eligibility Requirements

The lender must be able to make the warranties that are described in the Mortgage Selling and Servicing Contract. Therefore, before delivery of a loan to Fannie Mae where the property may have been damaged by a disaster, the lender is expected to take prudent and reasonable actions to determine whether the condition of the property may have materially changed. The lender is responsible for determining if an inspection of the property and/or new appraisal is necessary to support this warranty. If a property is located in a condo or co-op project, both the condition of the unit and the condition of the building in which the unit is located must be assessed.

Lenders should use the following criteria when determining if the loan can be delivered to Fannie Mae:

  • If the property has been damaged and the damage does not affect the safety, soundness, or structural integrity of the property and the repair items are covered by insurance, the lender may deliver the loan to Fannie Mae. In these circumstances, the lender must obtain documentation of the professional estimates of the repair costs and must ensure that sufficient funds are available for the borrower's benefit to guarantee the completion of the repairs.
  • If the property was damaged and the damage is uninsured or the damage affects the safety, soundness, or structural integrity of the property, the property must be repaired before the loan is delivered to Fannie Mae.

These requirements are necessary to support the lender’s property representations and warranties, and apply through the end of the delivery process which is the whole loan purchase date or MBS settlement date. For DU loan casefiles with an appraisal waiver offer, the lender may exercise the offer as long as they have complied with the above requirements with regard to property condition and repairs. This applies in addition to the standard appraisal waiver requirements in B4-1.4-10, Appraisal Waivers.

Note: The above requirements do not apply to high LTV refinance loans. See B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan for requirements related to properties impacted by a disaster. For delivered loan requirements, see the Servicing Guide, Chapter D1-3.

DU is updated periodically to incorporate ZIP codes in FEMA-Declared Disaster Areas eligible for Individual Assistance. Fannie Mae may also add areas impacted by other disasters or emergencies at its discretion. New loan casefiles for properties in those ZIP codes are excluded from consideration for a new appraisal waiver offer. 

For additional information, see B2-3-05, Properties Affected by a Disaster.

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