Fannie Mae Servicing Guide B-6-01 — Lender-Placed Insurance Requirements

Fannie Mae Servicing Guide B-6-01 — Lender-Placed Insurance Requirements

Effective 2015-10-14 · publisher's stamp for this provision

B-6-01, Lender-Placed Insurance Requirements (10/14/2015) Introduction This topic contains the following: Servicer Responsibilities Related to Lender-Placed Insurance Lender-Placed Insurance Deductible Requirements Servicer Responsibilities Related to Lender-Placed Insurance If the servicer cannot obtain evidence of acceptable property or flood insurance for a property securing a mortgage loan, the servicer must obtain lender-placed insurance in compliance with Fannie Mae’s insurance requirements. The following table provides the servicer’s responsibilities related to lender-placed insurance. ✓ The servicer must... Only issue lender-placed insurance coverage after it makes unsuccessful attempts to obtain evidence of insurance in accordance with applicable law. Not use a lender-placed insurance carrier that is an affiliated entity, as defined below, for a lender- placed insurance policy, including any captive insurance or reinsurance arrangements with an affiliated entity. Exclude any lender-placed insurance commissions or payments (including any incentive based compensation regardless of its designation as commission, bonus, fees, or other types of payments from the servicer’s lender-placed insurance carrier; for example, underwriting bonuses or other payments based on insurance loss ratios) earned on a lender-placed insurance policy by the servicer, broker, or any affiliated entity, as defined below, from the lender-placed insurance premiums charged to the borrower or submitted for reimbursement from Fannie Mae. Provide copies of its lender-placed insurance policy, including any other contractual arrangements between the servicer and a lender-placed insurance carrier, upon Fannie Mae’s request. Provide any documentation or data relating to its lender-placed insurance activities and lender- placed insurance coverage requested by Fannie Mae within 30 days of Fannie Mae’s request. In compliance with applicable law: • terminate any lender-placed insurance, and • refund all lender-placed insurance premiums and fees charged during any period of coverage overlap. For purposes of lender-placed insurance, an affiliated entity is defined as an entity owned or controlled, in whole or in part, by the servicer including, but not limited to, a subsidiary or joint venture of the servicer; an entity that owns or controls, in whole or in part, the servicer (for example, the parent company of the servicer); or an entity under common ownership or control with the servicer (for example, two subsidiaries of the same parent company). An affiliated entity does not include a publicly traded company where the servicer owns less than 5% of its stock. Lender-Placed Insurance Deductible Requirements The servicer must set the deductible for a lender-placed property insurance policy based on the following table. If the coverage amount is... Then the required deductible is... less than $100,000 $1,000. from $100,000 up to and including $250,000 $2,000. greater than $250,000 $2,500. Note: Lender-placed flood insurance, and lender-placed wind- or hail-only insurance policies are excluded from this requirement. Chapter B-7, Liability and Fidelity/Crime Insurance Requirements for Project Developments Introduction This chapter describes the requirements relating to liability and fidelity/crime insurance for project developments.

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