source:
  type: guide
  id: fnma-sel-b7-3-03
  authority: Fannie Mae Selling Guide B7-3-03 — Master Property Insurance Requirements
    for Project Developments
  description: Fannie Mae Selling Guide B7-3-03 — Master Property Insurance Requirements
    for Project Developments.
  coverage_tier: operative
obligations:
- id: fnma-sel-b7-3-03-full
  canonical_id: fnma-sel-b7-3-03-full
  section: Fannie Mae Selling Guide B7-3-03 — Master Property Insurance Requirements
    for Project Developments
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B7-3-03 — Master Property Insurance Requirements
      for Project Developments
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B7-3-03, Master Property Insurance Requirements for Project
      Developments (02/07/2024) Introduction This topic contains information on master
      property insurance requirements for project developments, including: Overview
      Determining if a Master Property Insurance Policy is Required Coverage Requirements
      Determining the Required Coverage Amount Deductible Requirements Special Coverage
      Requirements for Project Developments Special Coverage Requirements for Condo
      Projects Builder/Developer Property Insurance Policies Policies Covering Multiple
      Projects Overview This topic covers requirements for master property insurance
      policies covering the common elements and residential structures of project
      developments. The requirements applicable to condo projects in this topic also
      apply to two- to four-unit condos and detached condos, unless stated otherwise.
      For the purposes of this topic and B7-3-04, Individual Property Insurance Requirements
      for a Unit in a Project Development, the following deﬁnitions apply: Common
      elements refers to insurable, non-residential elements of a project development.
      Examples include, but are not limited to, clubhouses, parking areas or structures,
      and recreational facilities. Residential structures refers to the insurable
      elements of a building that contains one or more residences. Determining if
      a Master Property Insurance Policy is Required The requirements for individual
      property insurance policies will vary based on the homeowners'' association
      (HOA) or co-op corporation''s legal documents and the master property insurance
      policy. The following table provides the requirements based on the project type.
      Published May 6, 2026 863 Project Type Requirement PUD Individual property insurance
      policies as described in B7-3-02, Property Insurance Requirements for One-to
      Four-Unit Properties are required for each property securing a loan that Fannie
      Mae purchases in a PUD project unless the project''s legal documents provide
      for a master property insurance policy that covers both the common elements
      and residential structures. In that case, Fannie Mae will accept the master
      property insurance policy in satisfaction of its insurance requirements for
      the subject property. The borrower may still have to maintain an individual
      unit owner policy as described in Coverage Requirements in this topic. When
      units located within a PUD are covered by a master property insurance policy
      maintained by the HOA, the lender or servicer must verify that the insurance
      provides coverage for both the common elements and residential structures. When
      units located within a PUD are covered by individual property insurance policies
      maintained by their respective owner(s), the lender or servicer is not required
      to verify master property insurance coverage on PUD common elements. Condo Master
      property insurance policies are required for the common elements and residential
      structures for each loan that Fannie Mae purchases in a condo project unless
      the condo project''s legal documents require individual property insurance policies
      for each unit. In that case, the individual property insurance policy must meet
      the requirements in B7-3-02, Property Insurance Requirements for One-to Four-Unit
      Properties. When a master property insurance policy is required, the lender
      or servicer must verify that the master property insurance provides coverage
      for both the common elements and residential structures. The borrower may still
      have to maintain an individual unit owner policy as described in Coverage Requirements
      in this topic. Co-op Master property insurance policies are required for the
      common elements and residential structures for each loan that Fannie Mae purchases
      in a co-op project unless the co-op project''s legal documents require individual
      property insurance policies for each unit. In that case, the individual property
      insurance policy must meet the requirements in B7-3-02, Property Insurance Requirements
      for One-to Four-Unit Properties. When a master property insurance policy is
      required, the lender or servicer must verify that the master property insurance
      provides coverage for both the common elements and residential structures. The
      borrower may still have to maintain an individual unit owner policy as described
      in Coverage Requirements in this topic. To the extent the master property insurance
      policy does not cover the interior of the unit or improvements to the unit,
      the borrower must maintain an individual unit owner property insurance policy
      (see B7-3-04, Individual Property Insurance Requirements for a Unit in a Project
      Development for additional requirements). Coverage Requirements Published May
      6, 2026 864 When required, a master property insurance policy must be maintained
      with premiums paid as a common expense by the HOA or co-op corporation, as applicable.
      The policy must cover all insurable property elements. Common personal property
      and supplies should be covered, if applicable. The master property insurance
      policy must provide for claims to be settled on a replacement cost basis. Property
      insurance policies that provide for claims to be settled on an actual cash value
      basis are not acceptable. Policies that limit, depreciate, reduce or otherwise
      settle losses at anything other than a replacement cost basis are also not acceptable.
      Master property insurance coverage policies covering project developments should
      be written on a "Special" coverage form or equivalent. At a minimum, the coverage
      must include the perils covered by a commercial "Broad" coverage form, as listed
      in the following table. ✓ Required Perils Fire Lightning Explosion Windstorm
      (including named storms designated by the U.S. National Weather Service or the
      National Oceanic and Atmospheric Administration by a name or number) Hail Smoke
      Aircraft or Vehicles Riot or civil commotion Vandalism Sprinkler leakage Sinkhole
      collapse Volcanic action Published May 6, 2026 865 ✓ Required Perils Falling
      objects Weight of snow, ice or sleet Water damage If a master property insurance
      policy excludes or limits coverage of any of the required perils, the HOA or
      co-op corporation must obtain an acceptable stand-alone property insurance policy
      which provides adequate coverage for the limited or excluded peril (see B7-3-05,
      Additional Insurance Requirements for additional information). See Named Insured
      for Property and Flood Insurance in B7-3-08, Mortgagee Clause, Named Insured,
      and Notice of Cancellation Requirements for the named insured requirements.
      Determining the Required Coverage Amount The lender or servicer must verify
      that the property insurance coverage amount is at least equal to 100% of the
      replacement cost value of the project improvements, including common elements
      and residential structures, as of the current property insurance policy eﬀective
      date. The source that the lender or servicer uses to verify the coverage amount
      may be the property insurer, an independent insurance risk specialist, or other
      professional with appropriate resources to make such a determination. This may
      include, but is not limited to, a statement from the insurer or other applicable
      professional, a replacement cost estimator, or an insurance risk appraisal.
      Deductible Requirements The following table describes the maximum allowable
      deductible for master property insurance policies covering project developments.
      Deductible Type Maximum Deductible Per occurrence The maximum allowable deductible
      for all required property insurance perils is 5% of the master property insurance
      coverage amount. Published May 6, 2026 866 Deductible Type Maximum Deductible
      Per occurrence, multiple deductibles When a master property insurance policy
      includes multiple deductibles, such as a separate deductible that applies to
      windstorms, or a separate deductible that applies to a speciﬁc property element
      such as the roof, the total amount for such deductibles applicable to a single
      occurrence must be no greater than 5% of the insurance coverage amount. Per
      occurrence, per unit Fannie Mae will allow a per unit master property insurance
      policy deductible when the sum of the applicable per unit deductibles is greater
      than 5% of the coverage amount and all of the following requirements are met.
      1. The master property insurance policy has a per unit deductible for named
      perils speciﬁc to a geographic area where such coverage is common and customary;
      and 2. The borrower''s individual property insurance policy includes: a. coverage
      for the applicable peril(s); b. coverage for master property insurance policy
      deductible assessments levied on the unit owner by the HOA or co-op corporation
      for the applicable peril(s); and c. loss assessment coverage in an amount suﬃcient
      to cover assessments in excess of 5% of the master property insurance policy
      coverage amount, divided by the number of units. Note: A deductible buy-back
      insurance policy purchased by the HOA or co-op corporation may be used to meet
      Fannie Mae''s master property insurance policy deductible requirements, provided
      the policy meets all other property insurance requirements in Chapter B7-3,
      Property and Flood Insurance, including insurer rating requirements. Special
      Coverage Requirements for Project Developments The following special coverage
      requirements apply to condo, co-op, and PUD master property insurance policies:
      Inﬂation Guard Coverage - The coverage is not required if it is not obtainable
      in the insurance market available to the association; Building Ordinance or
      Law Coverage - The coverage must include: Coverage A: loss to the undamaged
      portion of a building, Coverage B: demolition costs, and Coverage C: increased
      costs of construction. Building Ordinance or Law Coverage may be included in
      the property coverage form or obtained as an endorsement to the property insurance
      policy. The coverage is not required if it is not obtainable in the insurance
      market available to the association; and Boiler and Machinery/Equipment Breakdown
      Coverage - This coverage is required if the project development has central
      heating or cooling. The coverage amount must equal the lesser of $2 million
      or Published May 6, 2026 867 the replacement cost value of the building(s) housing
      the boiler or machinery. This coverage may be included in the property coverage
      form, obtained as an endorsement to the master property insurance policy, or
      the HOA or co-op corporation may purchase a stand-alone boiler and machinery
      policy. Note: Boiler and Machinery/Equipment Breakdown Coverage may also be
      referred to as Steam Boiler Coverage or Mechanical Breakdown Coverage. Special
      Coverage Requirements for Condo Projects Master property insurance policies
      for condo projects must be endorsed with a Condominium Association Coverage
      Form or its equivalent. The endorsement must include the following provisions
      or comparable language: Recognition of an Insurance Trustee: If you name an
      insurance trustee, we will adjust losses with you, but we will pay the insurance
      trustee. If we pay the trustee, the payments will satisfy your claims against
      us. Waiver of Rights of Recovery: We waive our rights to recover payment from
      any unit-owner of the condominium that is shown in the declarations. Unit-owner''s
      Insurance: A unit-owner may have other insurance covering the same property
      as this insurance. This insurance is intended to be primary, and not to contribute
      with such other insurance. Builder/Developer Property Insurance Policies When
      a project is under development, it may be covered by the builder/developer''s
      property insurance policy if the policy provides equivalent coverage to the
      requirements for project developments in this topic. When property coverage
      ceases per the terms of the builder/developer''s policy, the HOA or co-op corporation
      must obtain a master property insurance policy in accordance with Fannie Mae''s
      requirements. Separate projects under development by the same developer will
      be considered aﬃliated during the period when control of the project has not
      yet transferred from the builder/developer to the individual owners or related
      HOA or co-op corporation. The aﬃliated status of the subject project ends when
      the property coverage ceases per the terms of the builder/developer''s policy.
      Policies Covering Multiple Projects Except as described below, unaﬃliated projects
      may not share a master property insurance policy. Each project must maintain
      its own policy that meets Fannie Mae requirements, as detailed throughout this
      topic. If a property insurance policy that covers multiple unaﬃliated projects
      provides a dedicated coverage amount for each individual covered project, the
      policy structure may provide equivalent coverage to Fannie Mae''s coverage amount
      requirements. The coverage amount dedicated to the subject project must be suﬃcient
      to cover the full replacement cost value of the project improvements including
      the common elements and residential structures. The lender or servicer must
      review the insurance policy and any other associated documents needed to adequately
      evaluate the insurance coverage. The HOA or co-op corporation must be protected
      in the same manner as if it maintained a master property insurance policy. The
      coverage of each insured project cannot be aﬀected by any actions or omissions
      of unaﬃliated projects covered by the same policy. Additionally, all other Published
      May 6, 2026 868 master property insurance requirements for project developments
      must be met. The lender or servicer must document how they determined the applicable
      policy provides acceptable coverage as detailed above. A copy of the policy,
      along with the lender''s or servicer''s documentation must be maintained in
      the loan ﬁle. Recent Related Announcements The table below provides references
      to recently issued Announcements that are related to this topic. Announcements
      Issue Date Announcement SEL-2024-01 February 07, 2024 Announcement SEL-2022-10
      December 14, 2022'
  judgment: false
