Properties Affected by a Disaster ## At a Glance
- Lenders must verify that disaster-damaged properties are safe and structurally sound before delivering loans to Fannie Mae
- Minor damage covered by insurance can proceed to closing if repair funds are secured
- Major damage affecting safety or structural integrity must be repaired before loan delivery
- Properties in FEMA disaster areas get extended documentation timelines — 180 days instead of the usual requirements
- Loans in disaster areas must be delivered within two years of the FEMA declaration date
When Disaster Strikes Your Property If you're buying or refinancing a home that's been affected by a natural disaster, Fannie Mae has specific rules your lender must follow. These rules exist because lenders make warranties to Fannie Mae that the property is not damaged and is suitable collateral for the loan. Say a wildfire swept through your area three months ago, and you're now buying a house that had minor roof damage from flying debris. Your lender can't just ignore that damage happened. They need to verify the current condition of the property and determine whether any remaining issues affect the loan's eligibility.
The same applies if you're refinancing your current home that was damaged in a hurricane. Even if you've made some repairs, your lender needs to document the property's current condition to satisfy Fannie Mae's requirements.
How Lenders Evaluate Disaster-Damaged Properties Your lender will assess the damage based on two key factors: the severity of the damage and whether it's covered by insurance. This evaluation determines whether your loan can proceed to closing or if repairs must be completed first.
For minor damage that doesn't affect the home's safety, soundness, or structural integrity, your lender can approve the loan if the damage is covered by insurance. Think cosmetic issues like damaged siding, broken windows, or minor roof repairs that don't compromise the structure.
However, if the damage affects the home's structural integrity — like foundation cracks, major roof damage, or compromised load-bearing walls — the property must be fully repaired before your lender can deliver the loan to Fannie Mae.
Here's what your lender must verify for minor, insured damage:
- Professional estimates of repair costs
- Proof that insurance will cover the repairs
- Evidence that sufficient funds are available to complete the work
Required Documentation and Inspections Your lender has the responsibility to determine what documentation they need to verify the property's condition. This might include a new appraisal, a property inspection, or both, depending on the extent of the damage and how much time has passed since the disaster.
If you're buying a condo or co-op unit, your lender must assess both your individual unit and the overall building condition. Damage to common areas or the building structure can affect your loan eligibility even if your unit appears undamaged.
The lender will typically order a new appraisal if significant time has passed since the original appraisal or if there's any question about the property's current condition and value. The appraiser will note any visible damage and assess whether it affects the property's marketability.
Extended Timelines for FEMA Disaster Areas If your property is located in a ZIP code that FEMA has declared a disaster area eligible for individual assistance, you get additional flexibility with documentation timelines. Instead of the standard requirements, you have 180 days from the note date for key documents.
This extended timeline applies to your credit report, income and asset verifications, and the appraisal. Normally, these documents have shorter expiration periods, but Fannie Mae recognizes that disasters can disrupt the normal loan process.
Your lender can also disregard Desktop Underwriter messages about expired credit reports in these situations. However, if your lender wants representation and warranty relief from Fannie Mae's automated underwriting system, they still need to meet all other DU conditions, including any close-by dates.
Why These Rules Exist Fannie Mae requires these protections because disaster-damaged properties carry additional risks. A home that appears fine on the surface might have hidden structural damage that affects its value and marketability. Without proper verification, Fannie Mae could end up owning properties through foreclosure that have undisclosed damage.
The insurance requirement for minor damage ensures that repairs will actually get completed. If damage isn't covered by insurance and the borrower can't afford repairs, the property condition could deteriorate further, affecting the loan's performance.
The two-year delivery deadline for disaster area loans prevents lenders from holding onto these loans indefinitely while property conditions potentially change. It ensures that any disaster-related flexibilities are used promptly and appropriately.
Common Complications and Gotchas One frequent issue arises when insurance coverage is disputed or delayed. Even if you have a claim pending, your lender might not be able to proceed until the insurance company confirms coverage and provides a settlement amount. This can delay your closing significantly.
Another complication occurs with older damage that wasn't properly documented. If your property was damaged in a disaster two years ago but you're just now applying for a mortgage, your lender will need to verify that all repairs were completed properly and with permits where required.
For condos and co-ops, master insurance policies can create complications. Your individual unit might be fine, but if the building's master policy doesn't cover certain types of damage, or if the homeowners association is in dispute with insurers, it can affect your loan eligibility.
Value acceptance offers from Desktop Underwriter get suspended for properties in newly declared disaster areas. If you were counting on a streamlined appraisal process, you might need a full appraisal instead, which takes more time and costs more money.
Special Considerations for Different Loan Types These disaster property rules don't apply to high loan-to-value refinance loans, which have their own separate requirements under B5-7-02: High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan. If you're doing a high LTV refi, different rules govern how disaster damage is handled.
For disaster-related limited cash-out refinances, additional flexibilities may be available under B5-4.2-02: Disaster-Related Limited Cash-Out Refinance Flexibilities. These special refinance programs are designed to help homeowners recover from disasters and may have more lenient property condition requirements.
The rules apply through the entire loan delivery process, which means even if your property passes initial underwriting, any new damage that occurs before your lender delivers the loan to Fannie Mae could require additional documentation or repairs.
References
For the official guidelines, see B2-3-05: Properties Affected by a Disaster in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B2-3-05, Properties Affected by a Disaster (09/03/2025)
Property Eligibility Requirements
Value Acceptance Offers Following a Disaster
Age of Documentation Requirements
Uniform Appraisal Dataset (UAD) 3.6 Policy
Overview
The Mortgage Selling and Servicing Contract requires the lender to warrant for each loan it delivers to Fannie Mae that the property is not damaged by fire, wind, or other cause of loss and that there are no proceedings pending for the partial or total condemnation of the property. The lender also warrants that the loan conforms to all applicable requirements in the Selling Guide, including the requirement that the loan is an acceptable investment. Finally, the lender represents and warrants that it knows of nothing involving the loan or the property that can reasonably be expected to cause the loan to become delinquent or adversely affect the mortgage's value or marketability.
Property Eligibility Requirements
The lender must be able to make the warranties that are described above. Therefore, before delivery of a loan to Fannie Mae where the property may have been damaged by a disaster, the lender is expected to take prudent and reasonable actions to determine whether the condition of the property may have materially changed. The lender is responsible for determining if an inspection of the property and/or new appraisal is necessary to support this warranty. If a property is located in a condo or co-op project, both the condition of the unit and the condition of the building in which the unit is located must be assessed.
Lenders should use the following criteria when determining if the loan can be delivered to Fannie Mae:
If the property has been damaged and the damage does not affect the safety, soundness, or structural integrity of the property and the repair items are covered by insurance, the lender may deliver the loan to Fannie Mae. In these circumstances, the lender must obtain documentation of the professional estimates of the repair costs and must ensure that sufficient funds are available for the borrower's benefit to guarantee the completion of the repairs.
If the property was damaged and the damage is uninsured or the damage affects the safety, soundness, or structural integrity of the property, the property must be repaired before the loan is delivered to Fannie Mae.
These requirements are necessary to support the lender’s property representations and warranties and apply through the end of the delivery process which is the whole loan purchase date or MBS settlement date. For DU loan casefiles with a value acceptance or value acceptance + property data offer, the lender may exercise the offer as long as they have complied with the above requirements with regard to property condition and repairs. This applies in addition to the value acceptance requirements in B4-1.4-10, Value Acceptance and B4-1.4-11, Value Acceptance + Property Data.
Note: The above requirements do not apply to high LTV refinance loans. See
B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loanfor additional information. For delivered loan requirements, see the Servicing Guide, Chapter D1-3.
DU is updated periodically to incorporate ZIP codes included in FEMA-Declared Disaster Areas eligible for Individual Assistance. Fannie Mae may also add areas impacted by other disasters or emergencies at its discretion. New loan casefiles for properties in those ZIP codes are excluded from consideration for a new value acceptance or value acceptance + property data offer.
Value Acceptance Offers Following a Disaster
After Fannie Mae has received an acceptable appraisal that was performed following a disaster, that appraisal can serve as the basis for a future value acceptance or value acceptance + property data offer. Lenders may exercise these offers in accordance with the requirements in B4-1.4-10, Value Acceptance and B4-1.4-11, Value Acceptance + Property Data.
Age of Documentation Requirements
When a loan is secured by a property located in a FEMA-Declared Disaster Area eligible for individual assistance, Fannie Mae provides additional flexibilities. The following requirements apply:
The underwriting documentation, including credit reports and verifications of income and assets, must be dated no more than 180 days before the note date.
Lenders may disregard the message in the DU Underwriting Findings Report that indicates if the loan casefiles has not already closed, the credit report has expired.
The appraisal must be dated no more than 180 days before the note date. Lenders must comply with the property eligibility requirements above.
Lenders who wish to receive representation and warranty relief offered by the DU validation service must continue to comply with all conditions in the DU Underwriting Findings Report, including the close by date.
Loans originated in accordance with the age of documentation flexibilities, must be delivered to Fannie Mae no later than two years from the date of the disaster declaration by FEMA.
See B5-4.2-02, Disaster-Related Limited Cash-Out Refinance Flexibilities for information related to certain flexibilities offered for a disaster related limited cash-out transaction.
Uniform Appraisal Dataset (UAD) 3.6 Policy
Lenders using UAD 3.6 must follow the requirements in the UAD 3.6 Policy Supplement .
