Are there special flood insurance requirements for loans sold to the secondary market, such as Fannie Mae and Freddie Mac?
Because Fannie Mae and Freddie Mac are privately owned corporations, they can protect themselves by establishing loan purchase guidelines that are more stringent than the federal regulations. For example, for a single family residence, Fannie Mae and Freddie Mac require that flood insurance be maintained in an amount at least equal to 80% of the replacement cost of the insurable improvements; while the federal regulations only require coverage at least equal to the outstanding balance of the loan (up to the value of the improvements.) Another special requirement to note is that while the regulations do not prohibit the making, extending, increasing, or renewing of loans on properties in the Special Flood Hazard Area located in non-participating communities, Fannie Mae and Freddie Mac will not purchase them. Lending institutions that sell loans to the secondary market should familiarize themselves with the details of these guidelines. Back to Top 2.
Related Questions
- Are there special flood insurance requirements for loans sold to the secondary market, such as Fannie Mae and Freddie Mac?
- How is the secondary market, such as Fannie Mae and Freddie Mac, involved in the flood insurance requirements?
- Should "table funded" loans be reported as loans sold in the secondary market?
