Freddie Mac Single-Family Seller/Servicer Guide 4703.6 — Fidelity or employee dishonesty insurance for Condominium Projects and Cooperative Projects

Freddie Mac Single-Family Seller/Servicer Guide 4703.6 — Fidelity or employee dishonesty insurance for Condominium Projects and Cooperative Projects

Effective 2026-09-16 · Freddie Mac's stamp for this section

This section contains: ■ General requirements for fidelity or employee dishonesty insurance ■ Coverage requirements for fidelity or employee dishonesty insurance Effective for Mortgages with Application Received Dates on or after August 3, 2026. (a) General requirements for fidelity or employee dishonesty insurance Fidelity or employee dishonesty insurance is required for Condominium Projects and Cooperative Corporations, 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 Projects or Cooperative Projects consisting of 20 units or less ■ Condominium Projects or Cooperative Projects where the calculated amount of required coverage is less than or equal to $5,000 (based on the coverage requirement below) (b) Coverage requirements for fidelity or employee dishonesty The condominium homeowners association (HOA) or Cooperative Corporation must maintain fidelity or employee dishonesty insurance covering losses resulting from dishonest or fraudulent acts committed by directors, officers, managers, trustees, employees or volunteers who manage the funds collected and held or administered for the condominium (HOA) 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 HOA’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 HOA or Cooperative Corporation as the insured, and premiums must be paid as a common expense by the association or corporation; and ■ The coverage must equal no less than the maximum amount of funds in the custody of the condominium HOA, Cooperative Corporation or management firm at any one time Freddie Mac will accept reduced fidelity or employee dishonesty insurance coverage of no less than the sum of three months of assessments of Maintenance Fees on all units in the Condominium Project or Cooperative Project, provided the Project Documents require the condominium HOA or Cooperative Corporation and any management firm to adhere to certain financial controls if such controls include at least one of the following provisions: ■ The condominium HOA, 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 HOA, 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 HOA or Cooperative Corporation. ■ Two or more members of the board of directors must sign any checks drawn on the reserve fund. In States that require condominium HOA 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.

Source: Freddie Mac Single-Family Seller/Servicer Guide 4703.6 — Fidelity or employee dishonesty insurance for Condominium Projects and Cooperative Projects · source URL · snapshot e399c3dcaab28da0