Freddie Mac Single-Family Seller/Servicer Guide Section 4703.3 — Flood insurance

Freddie Mac Single-Family Seller/Servicer Guide Section 4703.3 — Flood insurance

4703.3: Flood insurance (06/01/24) (a) Determining if a property requires flood insurance A flood zone determination (FZD) must be made for each property securing a Mortgage sold to Freddie Mac. An FZD must be documented by a completed FEMA Standard Flood Hazard Determination Form, FEMA Form 086-0-032 (Exhibit 13, Standard Flood Hazard Determination Form [SFHDF]) in accordance with federal law. The SFHDF may be used in a printed, computerized or electronic manner and must be retained for the life of the Mortgage in either hard copy or electronic format. Any alternative electronic format must contain all mandatory fields indicated on the SFHDF. The date in the “Date of Determination” field on the SFHDF must be a date that is no more than 120 days before the Note Date of the Mortgage, or, if applicable, the Note Date of the refinance Mortgage. However, the “Date of Determination” field on the SFHDF may be a date that is more than 120 days before the Note Date of the Mortgage or, if applicable, the Note Date of the refinance Mortgage, if the Seller uses a “life of loan” FZD where the third party providing the FZD provides a “life of loan” certificate assuring that the Mortgage is monitored for compliance. The loan number or other identifying information in the “Loan Identifier” field on the SFHDF must be the loan number or other identifying information for the Mortgage or, if applicable, the refinance Mortgage. The Seller/Servicer warrants that any FZD made by a party other than the Seller/Servicer is guaranteed by the FZD maker to be accurate, in accordance with federal law. The Seller/Servicer, however, remains responsible to Freddie Mac for the accuracy of any FZD made by the Seller/Servicer or any party other than the Seller/Servicer. If the SFHDF identifies the insurable improvements on the Mortgaged Premises as located in an area that has been identified as a Special Flood Hazard Area (SFHA) containing the letter “A” or “V” within its designated zone on a flood map (Flood Hazard Boundary Map or Flood Insurance Rate Map) of FEMA, the Seller/Servicer must ensure that flood insurance is obtained and maintained on such improvements for the term of the Mortgage. The Seller/Servicer may waive or discontinue the flood insurance requirement if: ■ The Borrower and the Seller/Servicer have obtained, following a joint request to FEMA as provided under federal law, a Letter of Determination Review (LODR) concluding that the insurable improvements are not in the SFHA, or ■ The Borrower has provided the Seller/Servicer with a Letter of Map Amendment (LOMA) from FEMA excluding the insurable improvements or the entire property from the SFHA, or Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-27 ■ The Borrower has provided the Seller/Servicer with a Letter of Map Revision (LOMR) from FEMA removing the community’s SFHA designation The Borrower must maintain flood insurance on the insurable improvements until FEMA issues a LOMA, LOMR or LODR. Upon issuance of a LOMA, LOMR or LODR, the Borrower may request from FEMA a refund of paid flood insurance premiums through the insurance agent servicing the flood insurance policy. A copy of the LOMA, LOMR or LODR, as applicable, must be maintained in the Mortgage file in accordance with Chapters 3401, 3301 and 3302. If the insurable improvements on the Mortgaged Premises are located in an SFHA but the community does not participate in the National Flood Insurance Program (NFIP) (“nonparticipating community”), the Mortgage is not eligible for sale to Freddie Mac. If the insurable improvements on the Mortgaged Premises are located in an area that has not been mapped by FEMA and the Seller/Servicer is not aware of any flood risks to which the improvements are exposed, the Mortgage is eligible for sale to Freddie Mac without the benefit of flood insurance. If the area has not been mapped by FEMA but the Seller/Servicer is aware that the insurable improvements are exposed to flood risks, the Mortgage is not eligible for sale to Freddie Mac without flood insurance on the improvements. (b) Acceptable flood insurance policies The flood insurance policy may be one of the following: ■ A standard policy issued by the NFIP, or ■ A policy issued by a private insurer that is qualified under Section 4703.1, with at least equivalent terms and conditions to the standard NFIP policy for the types of improvements insured, including coverage, deductibles and exclusions and conditions offered (c) Coverage required (i) 1- to 4-unit properties If the community where the Mortgaged Premises are located participates in the Emergency Program of the NFIP, the flood insurance coverage on the insurable improvements must at least equal the lowest of the following: ■ The UPB of the Mortgage ■ The maximum amount of coverage currently sold under the Emergency Program of the NFIP for the type of improvements insured Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-28 ■ The replacement cost of the insurable improvements The Seller/Servicer must ensure that the Borrower increases flood insurance coverage on the insurable improvements when the community moves into the Regular Program of the NFIP as described below. If the community where the Mortgaged Premises are located participates in the Regular Program of the NFIP, the flood insurance coverage on the insurable improvements must at least equal the lowest of the following: ■ The UPB of the Mortgage ■ The maximum amount of coverage currently sold under the Regular Program of the NFIP for the type of improvements insured ■ The replacement cost of the insurable improvements The deductible may not exceed the maximum deductible amount currently allowed under the NFIP for the type of improvements insured. For 1- to 4-unit properties, the Seller/Servicer may waive the flood insurance requirements for structures on the Mortgaged Premises that are detached from the primary residential structure and do not serve as a residence. (ii) PUD or ground lease community units Flood insurance requirements for 1- to 4-unit properties apply to similar residential properties within a PUD or ground lease community. (iii) Condominium Units Flood insurance requirements for 1- to 4-unit properties apply to similar residential properties in a 2- to 4-Unit Condominium Project or Detached Condominium Project. If the Condominium Unit securing a Mortgage sold to or serviced for Freddie Mac is in a building in a Condominium Project other than a 2- to 4-Unit Condominium Project or Detached Condominium Project and all or part of the building is in an SFHA, the following flood insurance coverage, as applicable, is required: A. Condominium homeowners association’s coverage The condominium homeowners association must maintain building coverage on the building for the lower of: (i) 80% of the building’s replacement cost or Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-29 (ii) The maximum coverage amount available from NFIP per unit The condominium owners association must maintain contents coverage on the building for the lower of (i) the actual cash value of the contents in the building that are owned in common by the association members or (ii) the maximum amount of contents coverage sold by the NFIP for a condominium building. The deductible of the condominium owners association’s coverage may not exceed the maximum deductible amount currently allowed under the NFIP for condominium association building coverage. The deductible for association building contents may not exceed the maximum deductible amount currently allowed under the NFIP for association building contents. B. Unit owner’s coverage To the extent the condominium owners association’s building coverage meets the minimum requirements above, but the Condominium Unit allocation does not meet the 1- to 4-unit coverage requirement, the Borrower must maintain supplemental coverage on the Condominium Unit. The coverage must be at least equal to the difference between the condominium associations’ building coverage allocated to that Condominium Unit and the amount required on a 1- to 4-unit property. The deductible may not exceed the maximum deductible allowed for a 1- to 4-unit property. (iv) Cooperative Corporations The Cooperative Corporation must maintain flood insurance on each building that is located in an SFHA. The building coverage must be the lower of (i) 100% of the building’s replacement cost, or (ii) the maximum amount of building coverage sold by the NFIP. The contents coverage must be the lower of (i) 100% of the insurable replacement cost of all contents owned by the Cooperative Corporation, or (ii) the maximum amount of contents coverage sold by the NFIP. The deductible of the Cooperative Corporation coverage may not exceed the maximum deductible amount currently allowed under NFIP for building coverage. The deductible for Cooperative Corporation building contents may not exceed the maximum deductible amount currently allowed under the NFIP for contents coverage. A blanket policy of flood insurance covering more than one building or structure in the Cooperative Project is acceptable if each building or structure covered by the blanket policy is insured for at least the individual building and contents limits stated above. Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-30 4703.4: Liability insurance for Condominium Projects and Cooperative Projects (07/09/25) Effective June 10, 2020, the content of this section has moved from Section 8202.3(a). Liability insurance is required for all Condominium Projects and Cooperative Projects, except the following: ■ Condominium Projects reviewed under the streamlined project review type in Section 5701.4 ■ Condominium Projects and Condominium Unit Mortgages that meet the requirements in Section 5701.7 and are delivered as Exempt From Review ■ Cooperative Share Loans that meet the requirements in Section 5701.7 and are delivered as Exempt From Review ■ Freddie Mac Enhanced Relief Refinance® Mortgages The condominium homeowners association or Cooperative Corporation must maintain commercial general liability (CGL) insurance covering all common areas, Common Elements, commercial spaces and public ways in the Condominium Project or Cooperative Project. If not already included in the terms of the CGL coverage, there must be a “severability of interest” endorsement precluding the insurer’s denial of a unit owner’s claim because of negligent acts by the association, corporation or other unit owners. The insurer’s limit of liability per occurrence for personal injury, bodily injury or property damage under the terms of the above coverages must be at least $1 million and the coverage must provide for claim settlements on an occurrence basis. 4703.4: Liability insurance for Condominium Projects and Cooperative Projects (Future effective date 08/03/26) Effective for Mortgages with Application Received Dates on or after August 3, 2026. Liability insurance is required for all Condominium Projects and Cooperative Projects, except the following: ■ Condominium Projects and Condominium Unit Mortgages that meet the requirements in Section 5701.7 and are delivered as Exempt From Review Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-31 ■ Cooperative Share Loans that meet the requirements in Section 5701.7 and are delivered as Exempt From Review ■ Freddie Mac Enhanced Relief Refinance® Mortgages The condominium homeowners association or Cooperative Corporation must maintain commercial general liability (CGL) insurance covering all common areas, Common Elements, commercial spaces and public ways in the Condominium Project or Cooperative Project. If not already included in the terms of the CGL coverage, there must be a “severability of interest” endorsement precluding the insurer’s denial of a unit owner’s claim because of negligent acts by the association, corporation or other unit owners. The insurer’s limit of liability per occurrence for personal injury, bodily injury or property damage under the terms of the above coverages must be at least $1 million and the coverage must provide for claim settlements on an occurrence basis. 4703.5: Fidelity or employee dishonesty insurance for Condominium Projects and Cooperative Projects (07/09/25) Effective June 10, 2020, the content of this section has moved from Section 8202.3(b). Fidelity or employee dishonesty insurance is required for Condominium Projects and Cooperative Projects, except the following: ■ Condominium Projects reviewed under the streamlined project review type in Section 5701.4 ■ Condominium Projects and Condominium Unit Mortgages that meet the requirements in Section 5701.7 and are delivered as Exempt From Review ■ Cooperative Share Loans that meet the requirements in Section 5705.7 and are delivered as Exempt From Review ■ Freddie Mac Enhanced Relief Refinance® Mortgages ■ Condominium or Cooperative Projects consisting of 20 units or less ■ Condominium or Cooperative Projects where the calculated amount of required coverage is less than or equal to $5,000 (based on the coverage requirement below) Freddie Mac requires all condominium homeowners associations or Cooperative Corporations to obtain and maintain fidelity or employee dishonesty insurance that meets the terms and conditions of coverage detailed in this section. In States that require condominium homeowners Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-32 associations or Cooperative Corporations to obtain and maintain fidelity or employee dishonesty insurance on terms or conditions different from Freddie Mac’s, Freddie Mac will deem compliance with the State’s requirements to be in compliance with Freddie Mac’s requirements. The condominium homeowners association or Cooperative Corporation must maintain fidelity or employee dishonesty insurance covering losses resulting from dishonest or fraudulent acts committed by directors, managers, trustees, employees or volunteers who manage the funds collected and held or administered for the condominium homeowners association or Cooperative Corporation. A professional management firm must be insured to the same extent as an association or corporation that manages its own operation. The management firm must submit evidence of such coverage or must be insured under the condominium homeowners association’s or Cooperative Corporation’s policy. Fidelity or employee dishonesty insurance coverage must have all of the following characteristics: ■ The policy must name the condominium homeowners association or Cooperative Corporation as the insured, and premiums must be paid as a common expense by the association or corporation. ■ The coverage must equal no less than the maximum amount of funds in the custody of the condominium homeowners association, Cooperative Corporation or the management firm at any one time. A lower coverage limit is acceptable if the Project Documents require the condominium homeowners association or Cooperative Corporation and any management firm to adhere to certain financial controls. However, in such case, the coverage limit must at least equal the sum of three months of assessments or Maintenance Fees on all units in the Condominium Project or Cooperative Project. Freddie Mac will accept reduced fidelity or employee dishonesty insurance coverage based on greater financial controls if such controls include at least one of the following provisions: ■ The condominium homeowners association, Cooperative Corporation or management firm maintains separate accounts for the operating budget and the reserve fund. The depository institution in which funds are deposited sends copies of the monthly account statements directly to the association or corporation. ■ Separate records and accounts are maintained for each condominium homeowners association, Cooperative Corporation or other community association using the management firm’s services. The management firm does not have the authority to draw checks on or to transfer funds from the reserve fund of the condominium homeowners association or Cooperative Corporation. ■ Two or more members of the board of directors must sign any checks drawn on the reserve fund Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-33 4703.5: Fidelity or employee dishonesty insurance for Condominium Projects and Cooperative Projects (Future effective date 08/03/26) Effective for Mortgages with Application Received Dates on or after August 3, 2026. Fidelity or employee dishonesty insurance is required for Condominium Projects and Cooperative Projects, except the following: ■ Condominium Projects and Condominium Unit Mortgages that meet the requirements in Section 5701.7 and are delivered as Exempt From Review ■ Cooperative Share Loans that meet the requirements in Section 5705.7 and are delivered as Exempt From Review ■ Freddie Mac Enhanced Relief Refinance® Mortgages ■ Condominium or Cooperative Projects consisting of 20 units or less ■ Condominium or Cooperative Projects where the calculated amount of required coverage is less than or equal to $5,000 (based on the coverage requirement below) Freddie Mac requires all condominium homeowners associations or Cooperative Corporations to obtain and maintain fidelity or employee dishonesty insurance that meets the terms and conditions of coverage detailed in this section. In States that require condominium homeowners associations or Cooperative Corporations to obtain and maintain fidelity or employee dishonesty insurance on terms or conditions different from Freddie Mac’s, Freddie Mac will deem compliance with the State’s requirements to be in compliance with Freddie Mac’s requirements. The condominium homeowners association or Cooperative Corporation must maintain fidelity or employee dishonesty insurance covering losses resulting from dishonest or fraudulent acts committed by directors, managers, trustees, employees or volunteers who manage the funds collected and held or administered for the condominium homeowners association or Cooperative Corporation. A professional management firm must be insured to the same extent as an association or corporation that manages its own operation. The management firm must submit evidence of such coverage or must be insured under the condominium homeowners association’s or Cooperative Corporation’s policy. Fidelity or employee dishonesty insurance coverage must have all of the following characteristics: ■ The policy must name the condominium homeowners association or Cooperative Corporation as the insured, and premiums must be paid as a common expense by the association or corporation. Freddie Mac Single-Family Seller/Servicer Guide Chapter 4703 As of 05/06/26 Page 4703-34 ■ The coverage must equal no less than the maximum amount of funds in the custody of the condominium homeowners association, Cooperative Corporation or the management firm at any one time. A lower coverage limit is acceptable if the Project Documents require the condominium homeowners association or Cooperative Corporation and any management firm to adhere to certain financial controls. However, in such case, the coverage limit must at least equal the sum of three months of assessments or Maintenance Fees on all units in the Condominium Project or Cooperative Project. Freddie Mac will accept reduced fidelity or employee dishonesty insurance coverage based on greater financial controls if such controls include at least one of the following provisions: ■ The condominium homeowners association, Cooperative Corporation or management firm maintains separate accounts for the operating budget and the reserve fund. The depository institution in which funds are deposited sends copies of the monthly account statements directly to the association or corporation. ■ Separate records and accounts are maintained for each condominium homeowners association, Cooperative Corporation or other community association using the management firm’s services. The management firm does not have the authority to draw checks on or to transfer funds from the reserve fund of the condominium homeowners association or Cooperative Corporation. ■ Two or more members of the board of directors must sign any checks drawn on the reserve fund

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