When You Need Flood Insurance
Your lender determines flood insurance requirements using a FEMA Standard Flood Hazard Determination form. This official document shows whether your property sits in a Special Flood Hazard Area or other protected zones. You need flood insurance if any part of your home sits in a Special Flood Hazard Area. These are flood zones that start with the letter "A" or "V" on FEMA flood maps. Zone AE, A1-30, VE, and V1-30 all require coverage. You also need coverage if your property sits in a Coastal Barrier Resources System or Otherwise Protected Area, regardless of the flood zone designation. Say you're buying a house where the main structure sits outside the flood zone, but your detached garage sits in Zone AE. If that garage is part of your loan collateral and serves as residential space (like a guest apartment), you need flood insurance for it. But if it's just storage space that doesn't add to your loan security, no coverage is required.
Community Participation Requirements
Your community must participate in the National Flood Insurance Program for your loan to qualify for Fannie Mae purchase. If your town doesn't participate in NFIP and your property needs flood insurance, your loan won't be eligible. Properties in communities that only participate in NFIP's Emergency Program can still qualify. These communities have basic flood insurance available but haven't yet completed all the floodplain management requirements for the regular program. If your property sits in a Coastal Barrier Resources System but outside a flood hazard area, your loan can still qualify even if the community doesn't participate in NFIP.
Coverage Amount Requirements
Your flood insurance coverage must equal the smallest of three amounts: 100% of your home's replacement cost, the maximum coverage NFIP offers, or your loan balance. For most single-family homes, NFIP's maximum coverage is $250,000 for the dwelling and $100,000 for contents. If your home's replacement cost is $400,000 but your loan amount is $200,000, you need $200,000 in dwelling coverage. Private flood insurance can provide higher coverage limits than NFIP. If you choose private coverage, it must provide terms and coverage amounts at least equal to what NFIP would offer. Your lender will verify coverage amounts at closing and throughout the loan term. If you refinance for a higher amount, you may need to increase your flood insurance coverage.
Acceptable Insurance Policies
You can satisfy the requirement with either a National Flood Insurance Program policy or private flood insurance from an approved carrier. NFIP policies are standard across the country. Your lender will accept any valid NFIP policy that meets the coverage requirements. Private flood insurance must meet specific standards. The insurer must have acceptable financial ratings, and the policy terms must equal or exceed NFIP coverage. Your lender will review the full policy, not just a summary, to verify it meets requirements. A Policy Declaration page serves as acceptable proof of coverage. This document shows your coverage amounts, effective dates, and mortgagee information.
Special Rules for Condos and Co-ops
Condo and co-op projects have different flood insurance requirements because multiple units share common structures. For condos in flood zones, your homeowners association must maintain a Residential Condominium Building Associated Policy (RCBAP) or equivalent private coverage. This master policy covers the building structure and common areas. The HOA's master policy must cover at least 80% of the building's replacement cost. If the per-unit coverage falls short of individual loan requirements, you need a supplemental policy for the difference. Co-op corporations must maintain a General Property Form policy or equivalent private coverage. This covers the entire building since co-op owners hold shares in the corporation, not individual units. PUD (Planned Unit Development) owners need individual Dwelling Form policies on their specific units, just like single-family homeowners.
Required Documentation
Your lender needs specific documents to verify flood insurance compliance:
- FEMA Standard Flood Hazard Determination form showing the property's flood zone
- Flood insurance Policy Declaration page or full policy
- For condos and co-ops, evidence of the master policy maintained by the HOA or corporation
- Proof of premium payment or inclusion in escrow account
The Policy Declaration page must show your lender as the mortgagee. This ensures they receive notice of any policy changes or cancellations. For condo and co-op projects, your lender may request additional documentation from the HOA or corporation to verify master policy coverage and payment status.
Deductible Limits
Fannie Mae limits the deductible amounts on flood insurance policies. Your deductible cannot exceed the maximum amount currently offered by NFIP for your property type. For single-family homes, the maximum deductible follows NFIP's Dwelling Form limits. For condos, it follows RCBAP limits. Co-ops follow General Property Form limits. These limits change periodically as NFIP adjusts its program. Your lender will verify that your chosen deductible falls within acceptable ranges at closing. Higher deductibles reduce your premium but increase your out-of-pocket costs after a flood. Consider your financial situation when choosing deductible amounts within the allowable limits.
Common Problems and Complications
Flood zone changes can create complications during your loan process. If FEMA updates flood maps between your application and closing, your insurance requirements might change. Private flood insurance policies require careful review. Not all private policies meet Fannie Mae's equivalency requirements. Your lender must compare coverage terms, limits, and conditions to NFIP standards. Condo and co-op master policies can be complex. If the HOA's coverage is insufficient or the association fails to pay premiums, your loan might not qualify. Some associations don't understand their flood insurance obligations. Properties near flood zone boundaries sometimes get misclassified. If you believe your property was incorrectly placed in a flood zone, you can request a Letter of Map Amendment from FEMA, but this process takes time. NFIP program lapses during federal government shutdowns create special challenges. Your lender can still close your loan with proof of a completed application and premium payment, but coverage won't be active until the program resumes.
References
For the official guidelines, see B7-3-06: Flood Insurance Requirements for All Property Types in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B7-3-06, Flood Insurance Requirements for All Property Types (02/07/2024)
Determining if a Property Requires Flood Insurance
Determining if Flood Insurance is Required on Specific Structures
Acceptable Flood Insurance Policies
Requirements for One- to Four-Unit Properties
Delivery Requirements
Requirements During a National Flood Insurance Program Lapse
Determining if a Property Requires Flood Insurance
The lender and servicer must ensure that the subject property is adequately protected by flood insurance when required. Flood insurance coverage is required when a loan is secured by a property located in
a Special Flood Hazard Area (SFHA), or
a Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA).
The lender and servicer must determine whether the property is located in an SFHA, a CBRS, or an OPA by using the FEMA Standard Flood Hazard Determination form. All flood zones beginning with the letter "A" or "V" are considered SFHAs.
Note: If the subject property is located within a CBRS or an OPA, flood insurance is required regardless of whether the property is located in an SFHA.
Flood insurance is not required on a principal or residential detached structure securing the loan if the lender or servicer obtains a letter from FEMA stating that its maps have been amended and the structure is no longer in an SFHA.
Determining if Flood Insurance is Required on Specific Structures
The following table describes how to evaluate a property to determine if flood insurance is required. For these requirements, the "principal structure" is the primary residential structure on the subject property.
If...
Then flood insurance is...
any part of the principal structure is located within an SFHA
required.
the principal structure is not located within an SFHA, but a residential detached structure affixed to the land that serves as part of the security for the loan is located within the SFHA
required for the residential detached structure.
the principal structure is not located within an SFHA, but a non-residential detached structure affixed to the land that serves as part of the security for the loan is located within the SFHA
not required on either structure.
the principal structure is not located within an SFHA, but a detached structure affixed to the land that does not serve as part of the security for the loan is located within the SFHA
not required on either structure.
Community Eligibility
If the lender or servicer determines that a principal or residential detached structure is located in an SFHA, but the community does not participate in the National Flood Insurance Program (NFIP), the loan is not eligible for purchase by Fannie Mae.
If the property is in a non-participating community and a CBRS or an OPA, it is only eligible for purchase by Fannie Mae if it is not located in an SFHA.
Loans secured by properties in the Emergency Program of the NFIP are eligible for purchase by Fannie Mae with coverage equivalent to the NFIP maximum that is available.
Acceptable Flood Insurance Policies
The flood insurance policy must be one of the following:
a standard policy issued under the NFIP; or
a policy issued by a private insurer, provided
the terms and amount of coverage are at least equal to that provided under an NFIP policy based on a review of the full policy issued by a private insurer, and
the insurer meets Fannie Mae's rating requirements as specified in Property Insurer Rating Requirements in .
A Policy Declaration page is acceptable evidence of flood insurance.
Requirements for One- to Four-Unit Properties
The minimum amount of flood insurance required for first mortgages must be equal to the lesser of
100% of the replacement cost value of the improvements,
the maximum coverage amount available from NFIP, or
the unpaid principal balance (UPB) of the loan (or loan amount at the time of origination).
See Insurance Requirements for Renovation and Energy Improvement Loans in
for additional information.
See Mortgagee Clause for Property and Flood Insurance and Named Insured for Property and Flood Insurance in
for mortgagee clause and named insured requirements.
Requirements for Project Developments
When a loan is secured by a unit in an attached condo or co-op project and flood insurance is required as described in Determining if a Property Requires Flood Insurance, the lender and servicer must verify that the HOA or co-op corporation maintains a master flood insurance policy with premiums paid as a common expense, unless otherwise indicated in the table below.
The following table provides additional requirements based on the project type.
Condo
The lender and servicer must verify that the HOA maintains a Residential Condominium Building Associated Policy (RCBAP) or equivalent private flood insurance coverage for a condo building consisting of attached units located within an SFHA. The only building that must be verified is the subject unit's building. Fannie Mae does not require evidence of a master flood insurance policy, provided the unit owner maintains an individual flood dwelling policy that meets the coverage requirements of this Guide for the following loans or project types:
The master flood insurance policy maintained by the HOA must cover the subject unit's
The coverage amount for the building must be at least equal to the lesser of
(1)If the master flood insurance policy meets the minimum coverage requirement of 80% of the replacement cost value, but the per unit coverage amount does not meet the requirement for loans secured by one- to four-unit properties, as described in Requirements for One- to Four-Unit Properties, the unit owner must maintain a supplemental policy for the difference.
(2)If the commercial space of an attached condo is over 25%, coverage provided by the General Property Form (or equivalent coverage) is insufficient. A private flood insurance policy, or a private flood insurance policy in conjunction with a General Property Form policy (or equivalent coverage) must be maintained by the HOA to equate to coverage requirements for projects eligible for an RCBAP.
The contents coverage must equal the lesser of
Co-op
The lender and servicer must verify that the co-op corporation maintains a General Property Form policy or equivalent private flood insurance coverage for a co-op building that is located within an SFHA.
The master flood insurance policy maintained by the co-op corporation must cover the subject unit's
The coverage amount for the building must be at least equal to the lesser of
PUD
The lender and servicer must verify that each attached or detached individual PUD unit maintains a Dwelling Form policy or equivalent private flood insurance policy on the subject property.
See Requirements for One- to Four-Unit Properties above for the required amount of coverage.
See Mortgagee Clause for Property and Flood Insurance and Named Insured for Property and Flood Insurance in
for additional information.
Deductible Requirements
The following table describes the maximum deductible allowed by Fannie Mae for an NFIP or a private flood insurance policy.
One- to four-unit properties
The deductible must not exceed the maximum deductible amount currently offered by NFIP for one- to four-unit properties insured under an NFIP Dwelling Form.
Condo projects
The deductible must not exceed the maximum deductible amount currently offered by NFIP for condo projects insured by an RCBAP. This deductible requirement applies to all condo projects, regardless of the percentage of commercial space.
Co-op projects
The deductible must not exceed the maximum deductible amount currently offered by NFIP for co-op projects insured under an NFIP General Property Form.
PUDs
The deductible on individual attached or detached PUD units must not exceed the maximum deductible amount currently offered by NFIP for one- to four-unit properties insured under an NFIP Dwelling Form.
Delivery Requirements
The following table describes the special feature code requirements applicable to flood insurance. See
for detailed loan delivery requirements.
Structure Location and Status of Flood Insurance Coverage
Special Feature Code
SFC 170 Flood Insurance — Special Flood Hazard Area
SFC 175 Flood Insurance — Not a Special Flood Hazard Area
SFC 180 No Flood Insurance — Not a Special Flood Hazard Area
Requirements During a National Flood Insurance Program Lapse
The NFIP may lapse due to a shutdown of the federal government or if Congress does not renew the NFIP's authorization to issue new policies, increase coverage on existing policies, or issue renewal policies.
For the duration of such a lapse, a lender may sell a loan to Fannie Mae where flood insurance is otherwise required without an active flood insurance policy provided the requirements below are met.
During the lapse, lenders must have a process in place to identify properties securing loans sold to us without proper evidence of active flood insurance on the conditions that the borrower must provide acceptable evidence of:
a completed application for NFIP flood insurance and proof of the premium payment or the final settlement statement reflecting payment of the initial premium, or
the assignment of an existing NFIP flood insurance policy from the property seller to the purchaser.
The following table provides additional requirements that lenders and servicers must follow during the lapse.
✓
Lenders and servicers must...
Continue to make flood determinations, provide timely, complete and accurate notices to borrowers in accordance with applicable laws, and comply with all other flood insurance requirements.
Take all steps (as permitted by applicable law) necessary to facilitate the issuance of coverage once the lapse has ended.
Retain documentation to support acceptable evidence of flood insurance.
Refinance loans secured by properties where flood insurance is required typically already have acceptable flood insurance coverage in place at the time of closing. Specific requirements for refinance loans are listed below.
If a refinance loan...
Then the lender...
has acceptable flood insurance coverage in place at the time of closing that does not expire prior to sale to Fannie Mae
must be accurately reflected as the mortgagee named on the policy.
has a flood insurance policy that expires during the lapse and before sale to Fannie Mae
must follow all requirements in this topic adapted appropriately to a renewal.
requires more coverage as a result of the refinance
may sell a loan on the condition that the borrower provide acceptable evidence of an endorsement request and proof of the additional premium payment.
When delivering loans affected by a lapse of the NFIP, lenders must follow the Delivery Requirements described above and provide all applicable loan delivery data elements as if a required flood insurance policy was in place.
The lender and servicer remain obligated for all selling representations and warranties and servicing obligations concerning the existence of a standard policy issued under the NFIP or an equivalent private flood insurance policy.
Note: Fannie Mae accepts flood insurance policies from private insurers as listed in Acceptable Flood Insurance Policies, but such private flood insurance policy coverage is not a required alternative in the event of a lapse of NFIP coverage.
SEL-2019-07
