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B7-3-04, Individual Property Insurance Requirements for a Unit in a Project Development (12/14/2022)

Introduction

This topic contains information on property insurance requirements for units in project developments, including:


Determining if an Individual Property Insurance Policy on a Unit in a Project Development is Required

See Determining if a Master Property Insurance Policy is Required in  B7-3-03, Master Property Insurance Requirements for Project Developments for determining when a master property insurance policy and/or an individual property insurance policy is required.


Coverage Requirements

See Coverage Requirements in  B7-3-02, Property Insurance Requirements for One-to Four-Unit Properties, for the coverage requirements when an individual property insurance policy is required for a unit in a project development.

See  B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements for requirements applicable to a loan secured by a unit in a project development.


Determining the Required Coverage Amount

To the extent the master property insurance policy does not cover the interior or improvements of a unit in a project development, the borrower must maintain an individual property insurance policy.

The lender or servicer must verify the coverage amount is sufficient to restore the unit to its condition prior to a loss event.

Coverage sufficiency should be based on the best information known or available to the lender or servicer, which may include information obtained from the borrower, in collaboration with the insurer, the HOA or co-op corporation legal documents, or other professional with appropriate resources to make such a determination.

Fannie Mae recommends that lenders and servicers encourage borrowers to closely collaborate with an insurance professional to determine their individual insurance needs.


Deductible Requirements

See Deductible Requirements in  B7-3-02, Property Insurance Requirements for One-to Four-Unit Properties for deductible requirements when an individual property insurance policy is required for a unit in a project development.


Recent Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2022-10 December 14, 2022
Announcement SEL-2021-11 December 15, 2021

 

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