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Freddie Mac Insurance Requirements Remain Unchanged Despite a Lapse in the National Flood Insurance Program

June 1, 2010

The authority of the National Flood Insurance Program (NFIP) to issue new or renewal flood insurance policies or increase coverage on existing policies expired at midnight on May 31, 2010.

During this lapse in the NFIP’s authority, Freddie Mac’s policies on flood insurance in Chapters 46 and 58 of the Single-Family Seller/Servicer Guide (Guide) remain unchanged, including:

• Seller/Servicers originating mortgages for sale to Freddie Mac must continue to perform flood zone determinations.
• Properties located in Special Flood Hazard Areas securing mortgages owned by and delivered to Freddie Mac must have flood insurance coverage.
• For Servicers, payments to renew expiring policies must be made as scheduled.

If a borrower applies for NFIP flood insurance, acceptable evidence pending issuance of a final NFIP policy may include one of the following:

• A completed and executed NFIP Flood Insurance Application plus a copy of the borrower’s premium check or agent’s paid receipt;
• A completed and executed NFIP Flood Insurance Application plus the final HUD-1 form reflecting the flood insurance premium collected at closing;
• A completed and executed NFIP General Change Endorsement Form showing the assignment of the current flood insurance policy by the property seller to the borrower; or
• An agent-executed NFIP Certification showing proof of purchase of flood insurance.

Seller/Servicers that accept interim evidence of NFIP coverage as described above during the lapse in the NFIP’s authority must follow up once the NFIP’s authority has been reinstated, to ensure that they have final evidence of coverage meeting the requirements of Guide Section 58.7.

If a borrower applies for private flood insurance, the insurer’s binder or equivalent of the applicable NFIP form is acceptable. Private flood insurance is not affected by a lapse in the NFIP’s authority.