Freddie Mac Single-Family Seller/Servicer Guide 8202.6 — Lender-Placed Insurance (LPI)

Freddie Mac Single-Family Seller/Servicer Guide 8202.6 — Lender-Placed Insurance (LPI)

Effective 2025-07-09 · Freddie Mac's stamp for this section

This section contains information related to: ■ Insurance coverage requirements ■ Defined term for Lender-Place Insurance (LPI) ■ Required deductible for LPI covered dwelling (a) Insurance coverage requirements The Seller/Servicer must require the Borrower to obtain appropriate insurance coverage in accordance with the terms of the Security Instrument, the Guide and applicable law. The Servicer must continuously monitor the Borrower and Mortgage to ensure that adequate coverage has been obtained and remains in force. If the Borrower’s coverage is canceled or in jeopardy of cancelation due to non-payment of premium, the Servicer must attempt to continue coverage by paying the premium on behalf of the Borrower in accordance with applicable law. If the Borrower and the Servicer do not or cannot continue such coverage or if the coverage obtained is canceled or lapses, the Servicer must obtain LPI. The Servicer must adjust the Borrower’s Escrow payments accordingly or bill the Borrower to recover the advance if the Servicer does not maintain an Escrow account for the Borrower. If the Borrower fails to reimburse the Servicer, the Servicer may recommend acceleration to Freddie Mac for the Borrower’s default under the terms of the Security Instrument. If the additional coverage cannot be obtained, the Servicer must immediately make appropriate recommendations to Freddie Mac (see Directory 5). If the Servicer obtains LPI coverage for the Borrower from an LPI carrier in accordance with this section, the following apply: ■ The Servicer or agents, brokers or other entities affiliated with the Servicer may not receive any compensation in the form of commissions or similar incentive-based compensation regardless of its designation as commission, bonus, fees or other type of payment from LPI carriers; and ■ The Servicer may not use its own affiliated entities to insure or reinsure LPI (b) Defined term for LPI For purposes of this section an “entity” is “affiliated” with the Servicer when it is owned or controlled, in whole or in part, by the Servicer, including, but not limited to, a subsidiary of or in a joint venture or partnership with the Servicer. An affiliated entity shall also include any entity that owns or controls, in whole or in part, the Servicer (e.g., the parent company of the Servicer) and any entity that is under common ownership or control with the Servicer (e.g., two subsidiaries of the same parent company). An affiliated entity shall not include a publicly traded company of whose stock the Servicer owns less than 5%. (c) Required deductible for LPI policies The required deductible is based on the dwelling coverage amount provided by the LPI policy. These deductibles are required for all perils except wind, hail and flood, to the extent permissible under applicable State law. Required deductibles for LPI policies are provided in the table below: LPI policy coverage requirements Dwelling coverage Deductible Less than $100,000 $1,000 $100,000 up to and including $250,000 $2,000 Greater than $250,000 $2,500 The Servicer must comply with all applicable law pertaining to administration of LPI, including providing notices to the Borrower and refund of premium for duplicate coverage. The Servicer must, upon request from Freddie Mac, provide a copy of the insurance policy and any and all agreements with any LPI carrier used by the Servicer on Mortgages demonstrating compliance with the above requirements. A Servicer’s failure to comply with the above requirements may result in any of the remedies available to Freddie Mac in Section 3601.1.

Source: Freddie Mac Single-Family Seller/Servicer Guide 8202.6 — Lender-Placed Insurance (LPI) · source URL · snapshot 4c94f67729042dd6