Recently, Freddie Mac published a new Bulletin for the Multifamily Seller/Servicer Guide that addresses some flood insurance requirement changes for multifamily properties. This includes revisions to their flood insurance requirements, as well as an update on maximum deductible allowance to reflect current market conditions. Changes are effective on or after January 1, 2017 and applicable to both new loan submissions and insurance renewals for existing loans.
Changes to Flood Insurance Requirements
The Multifamily Seller/Servicer Guide updates include the requirement that all Multifamily Sellers and Servicers must meet the minimum requirements of the Federal flood insurance statutes, since many of them are regulated by Federal financial regulatory agencies. It also includes provisions for Borrower contents and business personal property, and an exemption of certain low-value, detached structures (such as sheds and carports) from the mandatory flood insurance coverage requirements. As stated in the Bulletin, the following changes to requirements for mandatory flood insurance coverage requirements are:
- Officially cite the Federal Flood Insurance Statutes as part of our Guide to foster consistency related to mandatory purchase requirements;
- Add coverage requirements for Borrower contents and personal property located within buildings in Special Flood Hazard Areas (SFHAs) requiring coverage;
- Allow exemption for low-value structures meeting the definition of detached structures under the Federal Flood Insurance Statutes;
As stated in the Bulletin, the maximum deductible allowance is updated to reflect current market conditions for blanket flood policies, and to state that when NFIP policies are used to provide part of the flood insurance coverage, the maximum deductible available under the NFIP is acceptable.