| FHLMC May 30th Bulletin |
| Wednesday, 31 May 2006 | |
|
Freddie Mac May 30th
Bulletin
To help reduce exposure to loss from natural disasters and
lower insurance costs for borrowers, Freddie Mac has revised
its deductible requirements. The three changes outlined below are
effective immediately.
One to Four Unit
Properties
The deductible for fire, water (not caused by flooding) or
wind loss for one- to four-unit properties may not exceed 5% of the
limit maintained for dwelling coverage, regardless if the
deductibles are individual or combined by damage category. This is
an increase from Freddie Mac's former requirement that the
deductibles not exceed the higher of $2,000 or 2% of the policy's
insurance limit for windstorm or hail loss, or $1,000 or 1% of
the policy's limit for all other covered losses. Freddie Mac
identified extended coverage to include loss from windstorm, hail,
explosion, riot, civil commotion, damage by aircraft, damage by
vehicles, and damage by smoke.
PUDs
For PUDs, ground lease communities and condominiums, there may
be a separate deductible for fire, water (not caused by flooding),
or wind loss that may not exceed 5% of the limit maintained for
building coverage, regardless if the deductibles are
individual or combined by damage category. Freddie Mac no longer
requires a single, all-risk deductible equal to the lower of
$10,000 or 1% of the building coverage limit.
Condominiums
The deductible under a condominium owner's association flood
insurance policy may not exceed the maximum deductible amount
currently allowed under the National Flood Insurance
Program.
The requirement changes stem from the requests of Freddie Mac
sellers/servicers, changes in the market, and in light of the
recent natural disasters. Freddie Mac encourages the
sellers/servicers to work with the borrowers to ensure they fully
understand their policy and deductible options and the effect
of the deductible on their potential insurance
recoveries.
For questions, sellers/servicers should call their Freddie Mac
Account Manager or (800) FREDDIE.
To view the full Bulletin please click on the following
link.
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