Document Collection for Condo and Coop Financing
Document collection is one of the most tedious aspects of purchase financing or refinancing a
Insurance requirements for condos and coops have recently undergone significant changes, with Fannie Mae introducing a new level of detail that requires confirmation of certain perils that are not always delineated in a master insurance policy. Lenders, underwriters, condo associations and coop boards being aware of this change is crucial. This article offers a comprehensive guide to the updated insurance requirements, how they affect the lending process, and why aligning with them is essential.
Fannie Mae’s recent decision adds an unprecedented level of detail to the master insurance requirements, catching many off-guard.
Fannie Mae unveiled new insurance requirements in December 2022, requiring explicit confirmation of particular perils that weren’t always specified in a traditional master insurance policy.
If any of the above perils are excluded or there are limits to the coverage of any of these perils, the condo association or coop corporation board must obtain an acceptable stand-alone property insurance policy which provides adequate coverage for the limited or excluded peril. The policy must provide for claims to be settled on a replacement cost basis as an actual case value basis is not acceptable. See requirements here: B7-3-03, Master Property Insurance Requirements for Project Developments (12/14/2022)
The term “special form,” previously considered the most inclusive form of coverage does not, in and of itself, satisfy Fannie Mae’s requirements as it is not specific enough to ensure that the listed perils are included. This poses a challenge for insurers that might not be aware of this, leaving lenders exposed to having a loan returned by Fannie Mae that has not addressed this new insurance requirement.
Lenders must make sure to specifically request that the perils listed are covered and make insurers aware that “special form” in and of itself, is not enough to satisfy Fannie Mae’s master insurance requirements.
Fannie Mae has also stipulated rules regarding deductibles, co-insurance, renovation loans, energy-related improvement loans, and various coverage amounts. These can be found in B7-3-03, Master Property Insurance Requirements for Project Developments (12/14/2022).
Understanding and navigating the new insurance requirements as well as other aspects of condo and coop project risk analysis and review can be complex. Project Risk Evaluation Partners (PREP) provides comprehensive condominium and cooperative project review services at virtually no cost to our clients. Established in 2019, PREP began with a single client and has since grown exponentially to serve lenders across the country on condominium and cooperative projects, nationwide. PREP’s accurate, timely, and comprehensive project risk analysis is an essential partner for lenders in the condominium and cooperative market.
To ensure your condo and coop loans meet secondary market eligibility guidelines, contact PREP today.
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