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How is the minimum amount of flood insurance coverage determined?

Determining if a Property Requires Flood Insurance

The lender and servicer must ensure that the property securing the loan is adequately protected by flood insurance when required. Flood insurance coverage is required when a loan is secured by a property located in

  • a Special Flood Hazard Area (SFHA), or
  • a Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA).

The lender and servicer must determine whether or not the property is located in an SFHA by using the Standard Flood Hazard Determination form endorsed by FEMA. All flood zones beginning with the letter “A” or “V” are considered SFHAs.

Refer to B7-3-07, Flood Insurance Coverage Requirements for additional information on how to evaluate a property to determine if flood insurance is required.

Determining the Amount of Required Flood Insurance Coverage

The minimum amount of flood insurance required for first-lien mortgages is the lowest of

  • 100% of the replacement cost of the insurable value of the improvements;
  • the maximum insurance available from the NFIP; or
  • the unpaid principal balance (UPB) of the loan (or loan amount at the time of origination).
For additional requirements for a unit in a project development, see B7-3-07, Flood Insurance Coverage Requirements.

For a property under construction or renovation, the flood insurance coverage must be in an amount equal to the “as is” value of the property. The coverage must be increased, if necessary, following completion of the renovation work to ensure that the coverage meets Fannie Mae's standard coverage requirements. See B7-3-02, General Property Insurance Coverage and B7-3-05, Additional Insurance Coverage.

For additional information, see B7-3-07, Flood Insurance Coverage Requirements.

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