source:
  type: guide
  id: hud-4000-1-iii-m-insurance-coverage-administration
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — m. Insurance
    Coverage Administration (04/29/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — m. Insurance
    Coverage Administration (04/29/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-m-insurance-coverage-administration-full
  canonical_id: hud-4000-1-iii-m-insurance-coverage-administration-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — m. Insurance
    Coverage Administration (04/29/2024)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — m. Insurance
      Coverage Administration (04/29/2024)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'm. Insurance Coverage Administration (04/29/2024) i. Hazard
      Insurance (A) Standard The Borrower is required to have, and maintain for the
      life of the HECM, Hazard Insurance, but may at any time instruct the Mortgagee
      to purchase and make payments for this insurance from available Principal Limit,
      when such funds are available. HUD and the Mortgagee may determine hazards which
      must be insured against. The Mortgagee must purchase and make payments for Hazard
      Insurance where the Borrower has required the Mortgagee to do so. The Mortgagee
      must: • maintain the amount for the period of time that is necessary to protect
      the Mortgagee’s investment; • be named as a “Loss Payee” on the Hazard Insurance
      policy; and • set aside sufficient funds for the payment of the renewal premium.
      If the Borrower chooses to be responsible for obtaining Hazard Insurance, the
      Mortgagee must obtain from the Borrower a copy of the insurance policy and evidence
      that the policy is renewed upon expiration. If the Borrower does not provide
      evidence that the policy has been renewed, the Mortgagee must proceed with the
      steps outlined in Lender-Placed Insurance. (B) Required Documentation The Mortgagee
      must retain in the Servicing File an annually issued certificate of insurance
      that is sufficiently detailed or a complete copy of the insurance policy to
      establish that the insurance meets the standard. ii. Insurance on Units in a
      Condominium Unit (A) Hazard (1) Standard The Mortgagee must verify that the
      Property is insured in the amount required under the Hazard Insurance section
      if the Condominium Association does not maintain Hazard Insurance in accordance
      with such requirements. III. SERVICING AND LOSS MITIGATION B. Title II Insured
      Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured HECMs Handbook
      4000.1 1462 Last Revised: 11/26/2025 (2) Required Documentation The Mortgagee
      must retain in the Servicing File a certificate of insurance that is sufficiently
      detailed or a complete copy of the insurance policy to establish that the insurance
      meets the standard. (B) Walls-In (HO-6) (1) Standard The Mortgagee must verify
      that the Borrower has obtained a Walls-In coverage policy (HO-6) if the master
      or blanket policy does not include interior unit coverage, including replacement
      of interior improvements and betterment coverage, to insure improvements that
      the Borrower may have made to the unit. The total coverage of both policies
      must equal 100 percent of the required Hazard Insurance amount. (2) Required
      Documentation The Mortgagee must retain in the Servicing File an annually issued
      certificate of insurance that is sufficiently detailed or a complete copy of
      the insurance policy to establish that the insurance meets the standard. iii.
      Payment of Renewal Premium (A) Standard When the Borrower has required the Mortgagee
      to purchase Hazard Insurance, the Mortgagee must pay the renewal premium when
      it is due. If the Borrower is required to pay the premium and fails to do so,
      the Mortgagee must: • advance funds from the line of credit; or • change the
      payment plan, if needed, and advance the funds. (B) Required Documentation Where
      the Borrower has required the Mortgagee to purchase Hazard Insurance or the
      Mortgagee advanced the funds because the Borrower failed to pay the renewal
      premium, the loan history must reflect each transaction as it is disbursed.
      In addition, the Mortgagee must retain in its Servicing File copies of: • the
      premium renewal notice; • the check payable to the insurance company; and •
      any required payment plan change. III. SERVICING AND LOSS MITIGATION B. Title
      II Insured Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured HECMs
      Handbook 4000.1 1463 Last Revised: 11/26/2025 Where the Borrower pays the renewal
      premium, the Mortgagee must obtain a copy of the declaration page of the policy
      with evidence of the new expiration date, or other documentation from the hazard
      insurance provider that contains: • name of the insured; • address of insured
      Property; • type of coverage; • insurance policy number; • insurance policy
      limits; • effective date of the insurance policy; • expiration date of the insurance
      policy; • name and contact information for the insurer; and • annual insurance
      premium. iv. Fee for Change in Hazard Insurance Policy The Mortgagee may assess
      a reasonable and customary fee, up to the amount listed in Appendix 3.0, for
      processing the Borrower’s request to change hazard insurance coverage when the
      existing policy has not yet expired. v. Flood Insurance (A) Standard For Properties
      located within a Special Flood Hazard Area (SFHA), the Mortgagee must ensure
      that Flood Insurance is maintained for the life of the HECM. Flood Insurance
      must be an amount at least equal to the lesser of: • 100 percent of the replacement
      cost of the insurable value of property improvements, which consists of the
      development or project cost less the estimated land cost at the time of closing;
      • the maximum amount of the National Flood Insurance Program (NFIP) insurance
      available with respect to the particular type of property; or • the outstanding
      principal balance of the HECM. Where the outstanding principal balance of the
      HECM is used to determine the amount of Flood Insurance coverage, the Flood
      Insurance must be adjusted each renewal cycle to cover an amount at least equal
      to the outstanding principal balance at the end of the insurance coverage period.
      If remapping causes a Property securing a HECM to become located in an SFHA,
      the Mortgagee must enforce HUD’s flood insurance requirements on coverage amounts
      and maintenance. (B) Required Documentation The Mortgagee must retain in the
      Servicing File an annually issued certificate of insurance that is sufficiently
      detailed or a complete copy of the insurance policy to establish that the insurance
      meets the standard. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing
      Programs Reverse Mortgages 1. Servicing of FHA-Insured HECMs Handbook 4000.1
      1464 Last Revised: 11/26/2025 vi. Lender-Placed Insurance (A) Definition Lender-Placed
      Insurance refers to Hazard and/or Flood Insurance purchased by the Mortgagee
      when the Borrower fails to renew the applicable required policy. Reasonable
      Rate refers to a rate that does not exceed the rate or advisory rate set by
      the principal state-licensed rating organization for essential property insurance
      in the voluntary market or, if coverage is available under a Fair Access to
      Insurance Requirements (FAIR) Plan, the FAIR Plan rate. For states without a
      principal state- licensed rating organization or FAIR Plan, the Mortgagee must
      provide to FHA information concerning the lowest rates available from an insurer
      for the types of coverage involved, with a request for a determination of whether
      the rate is reasonable. FHA will determine a rate is reasonable if it is the
      lowest rate available from an insurer for the types of coverage involved that
      approximates the rate assessed for comparable insurance coverage applicable
      to similarly situated properties in a state that offers a FAIR Plan or maintains
      a state-licensed rating organization. (B) Standard If the Borrower fails to
      renew or provide evidence of acceptable property insurance coverage when required,
      the Mortgagee must purchase a lender-placed Hazard and/or Flood Insurance where
      Flood Insurance is required. The Mortgagee may, at its discretion, obtain more
      coverage than is necessary to protect the Mortgagee’s interest. All insurance
      policies must be obtained at a reasonable rate. vii. Hazard or Flood Insurance
      Proceeds (A) Insurance Claims The Mortgagee must take necessary steps to ensure
      that hazard or flood insurance claims are filed and settled as expeditiously
      as possible. (B) Loss Settlement Amounts for Borrower Expenses and Personal
      Property The Mortgagee must promptly release to the Borrower all insurance settlement
      proceeds received for coverage of a Borrower’s Personal Property, temporary
      housing, and other transition expenses. The Mortgagee may not withhold Disbursement
      of such proceeds to cover an existing arrearage, such as a property charge advance,
      without the written consent of the Borrower. III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured
      HECMs Handbook 4000.1 1465 Last Revised: 11/26/2025 (C) Insurance Proceeds for
      Home Damage (1) Definition A Viable Repair Plan refers to a plan for repairs
      of a mortgaged Property within the amounts available through insurance proceeds
      and borrower funds. (2) Standard The Mortgagee must expedite the release of
      insurance proceeds for needed home repairs after ensuring sufficient funds are
      available and approving a Viable Repair Plan. (D) Application of Insurance Proceeds
      to Unpaid Principal Balance The Mortgagee must not apply insurance proceeds
      payable for home damages to arrearages and/or reduction of the unpaid principal
      balance unless: • the amount of the proceeds exceeds the costs to repair the
      damages to the home; or • the insurance proceeds are insufficient to repair
      the home damages based on a certified repair estimate, and the Borrower is unable
      to demonstrate that they have additional funds from other sources to complete
      the repairs. If the Mortgagee receives repayment from insurance or condemnation
      proceeds after restoration or repair of the damaged Property, then the available
      Principal Limit and HECM balance must be reduced by the amount of such proceeds.'
  judgment: false
