Lending services, banks and their auditors are required by federal law to sign that the loans they package and are taken out by Fannie Mae meet certain requirements, including those relating to insurance. If the mortgage does not have the correct insurance, it can not be part of the Fannie Mae-supported system. The Florida Senate passed insurance legislation that clearly jeopardizes the chances of Floridians owning a Fannie Mae mortgage because it does not meet the requirements. What's worse is that when many Floridians buy the type of insurance that does not meet the requirements, they may have the added burden and cost of adding mortgage coverage.
Here's what Fannie Mae says about insurance, which every policyholder must have if they have a mortgage:
Property insurance for properties that secure loans delivered to Fannie Mae must protect against loss or damage from fire and other hazards covered of the standard extension. The coverage must include conditions for compensation to be reimbursed with compensation costs. Extended coverage must at least include wind, riots (including riots), smoke, hail and damage caused by aircraft, vehicles or explosions. Typhoon coverage is required for security properties in Guam.
Fannie Mae does not accept property insurance that limits or excludes from coverage (in whole or in part) storms, hurricanes, hail damage or other hazards that are normally included.
Lenders should inform borrowers that they may not obtain property insurance that includes such restrictions or exemptions, unless they can obtain separate insurance or approval from another commercial insurance company that provides adequate coverage for the limited or excluded danger or from an insurance pool. established by the State to cover the restrictions or exclusions.
For a first mortgage secured by a property where an insurance is maintained individually, Fannie Mae requires coverage equal to the lower of the following:
1. 100% of the insurable value of the improvements, determined by the property insurer; or
2. the unpaid remaining amount of the mortgage, as long as it corresponds to at least the minimum amount – 80% of the insurable value of the improvements – required to compensate for damage or loss on the basis of compensation costs. If it does not, coverage that provides the minimum amount required must be obtained.
The maximum allowable deductible for insurance covering a property (including ordinary parts of a PDO, cooperative or joint venture project) to secure a first mortgage loan is 5% of the nominal amount of the insurance. When a policy prescribes a separate deductible for wind losses (either in the policy itself or in a separate approval), that deductible may not exceed 5% of the insurance's claim. 1
The Florida insurance industry and their lobbyists are aware of these laws. They have deceived Florida politicians again by not fully explaining that the Senate proposal will create a huge mess for Floridians. Senate legislation allows insurance companies in Florida to sell insurance that does not meet the requirements to insure the ceiling without reimbursing the costs. Any insurance agent in Florida who sells such insurance that does not pay full compensation costs and that lists a mortgagee on the insurance should be sued to knowingly sell insurance that does not meet the requirements.
This Senate legislation harms policyholders and those with legitimate claims. who may run around from their own insurance company, which is discussed in, Do not believe Florida's insurance industry that laws will lower rates when rates often depend on the nature of the mother and reinsurance rates .
_______________________________________________  1 Fannie Mae Sales Guide Published April 7, 2021. https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart- B7-Insurance / Chapter-B7-3-property-and-flood-insurance / 1032998291 / B7-3-02-general-property-insurance-coverage-12-16-2020.htm