Fannie Mae’s and Freddie Mac’s Insurance Requirements Can Create Havoc for Borrowers
Fannie Mae’s and Freddie Mac’s Insurance Requirements Can Create Havoc for Borrowers
Freddie Mac and Fannie Mae have updated insurance guidelines that impact borrowers, particularly those in the multifamily housing space. Effective immediately, Freddie Mac and Fannie Mae will no longer accept General Liability policies that include sub-limits or exclusions for any of the following:
- Assault and Battery
- Firearms
- Animal Attacks
- Sexual Abuse and Molestation
Insurance brokers have increasingly encountered this issue, and some are actively discouraging clients from seeking loans through government-sponsored entities when possible and warning borrowers of the “troubles ahead” when financing through Freddie Mac and Fannie Mae.
Additional Requirements
In addition, Freddie Mac and Fannie Mae may require more than just Assault and Battery and other coverages. For example, as far as liability is concerned, they do not allow any of the following policy exclusions:
- No Co-Insurance Allowed or if present, must have Agreed Value Ordinance coverage (A, B, C, and D) - A, B, and C are not extremely hard to get, but many carriers do not offer Coverage D
- Terrorism Coverage must be purchased
Some of these coverages are harder or more expensive to find. Especially the Co-Insurance rule for older buildings. Additionally, Freddie Mac and Fannie Mae also may require Umbrella liability with different limits depending on loan amount and unit count.
If you have questions, check with a licensed insurance broker or agent.