This is a message from my bank in regards to investors requiring condos to have a “hazard insurance”.
There have been several questions over the last week regarding our requirements for condominium hazard insurance. As with all insurance requirements, we must follow the requirements of our investors. The most noteworthy question recently has been the requirement for a “walls-in” hazard insurance coverage policy, commonly known as an HO-6 policy. This has long been a Fannie Mae requirement; however, our investors have recently started to audit our files more thoroughly in regards to this requirement. Subsequently, this will be reviewed more thoroughly by the Closing Coordinators as loans are submitted to the Closing Department. I have attached a copy of the updated Closing Coordinator Checklist for your reference.
Per our investor guidelines, for attached condominiums (including 2-4 units) the borrower must obtain a “walls-in” (or HO-6) hazard insurance coverage policy unless we can document that the master insurance policy for the HOA covers the interior of the unit. The HO-6 policy must provide coverage in the amount of at least 20% of the appraised value with a 5% maximum deductible. Additionally, if the borrower is obtaining the “walls-in” policy, the premium must be escrowed on any loan where impounds are required.