Freddie Mac Update Insurance Requirements Remain Unchanged Despite a Lapse in the National Flood Ins
April 1st, 2010
Freddie Mac has issued an update titled,
Insurance Requirements Remain Unchanged Despite a Lapse in the National Flood Insurance Program.
Freddie Mac Insurance Requirements Remain Unchanged Despite a Lapse in the National Flood Insurance Program
The authority of the National Flood Insurance Program (NFIP) to issue new and renewal flood insurance policies and increase coverage on existing policies expired at midnight on March 28, 2010. Congress has adjourned without extending the NFIP’s authority and is expected to return on April 12, 2010. In the meantime, NFIP's authority has lapsed.
Despite the lapse in the NFIP’s authority, Freddie Mac’s policies on flood insurance in Chapters 46 and 58 of the Single-Family Seller/Servicer Guide (Guide) remain unchanged, including:
- Seller/Servicers originating mortgages for sale to Freddie Mac must continue to perform flood zone determinations.
- Dwellings on mortgaged properties in Special Flood Hazard Areas, and mortgages delivered to us secured by such properties, must have flood insurance coverage.
- For Servicers, payments to renew expiring policies must be effected as scheduled when servicing Freddie Mac mortgages.
If a borrower applies for NFIP flood insurance, acceptable evidence pending issuance of a final NFIP policy must include one of the following:
- A completed and executed NFIP Flood Insurance Application plus a copy of the borrower’s premium check or agent’s paid receipt;
- A completed and executed NFIP Flood Insurance Application plus the final HUD-1 form reflecting the flood insurance premium collected at closing;
- A completed and executed NFIP General Change Endorsement Form showing the assignment of the current flood insurance policy by the property seller to the borrower; or
- An agent-executed NFIP Certification of Proof of Purchase of Flood Insurance.
Seller/Servicers who accept interim evidence of NFIP coverage as described above during the lapse in NFIP’s authority must follow up to ensure that, after the NFIP has been reauthorized, they receive final evidence of such coverage meeting the requirements of Guide Section 58.7.
If a borrower applies for private flood insurance, the private insurer’s binder or equivalent of the applicable NFIP form is acceptable pending issuance of a final flood insurance policy. Private flood insurance is not affected by a lapse in the NFIP’s authority.
The Federal Insurance and Mitigation Administration, which administers the NFIP, has a standard process for its insurance agents to follow when there is a lapse in the NFIP’s authority.
If developments in the NFIP reauthorization process or instructions from FEMA warrant, we will provide further communications and guidance related to Freddie Mac flood insurance requirements. For more information about Freddie Mac’s flood insurance requirements, you should thoroughly review Guide Chapters 46 and 58, and contact (800) FREDDIE or your Freddie Mac representative with any questions.
To view the online Update, please click
here
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