Fannie Mae and Freddie Mac insurance requirements for multifamily loans
Short answer
Fannie Mae and Freddie Mac set nearly the same property insurance rules for multifamily loans: special form coverage at replacement cost for at least 100% of insurable value (90% when the property has more than one building), from insurers rated A- or better by AM Best.1,3 On a policy with its own limit for the property, most deductibles are capped at $50,000 per occurrence, or $100,000 when insurable value is $10 million or more. Percentage deductibles may reach 5% of total insurable value for wind and hail and 7.5% for named storms.1,3 Both also require 12 months of rent loss coverage, terrorism coverage, flood insurance for buildings in FEMA A or V zones, ordinance or law coverage for nonconforming properties and equipment breakdown coverage for regulated boilers.1,3
Cloudbreak team · Updated November 1, 2026 · 10 min read · 5 sources
Where the rules come from
The lender or its servicer checks the borrower's insurance against these rules at closing and at every renewal for the life of the loan, along with the insurance terms in the loan documents. Fannie Mae's rules are in Part II, Chapter 5 of its Multifamily Selling and Servicing Guide, with servicing steps in Part V, Section 413. Freddie Mac's are in Chapter 31 of its Multifamily Seller/Servicer Guide. This page uses Fannie Mae's guide effective October 26, 2026 and Freddie Mac's Chapter 31 as updated October 20, 2026.1,2,3
Property coverage
- Form: ISO special causes of loss coverage or its equivalent, which Freddie Mac also calls All Risk and Fannie Mae calls Special Peril Coverage.1,3
- Valuation: replacement cost. Both agencies allow roof coverings to be insured at actual cash value.1,3
- Amount: at least 100% of insurable value for a property with one building, and at least 90% for a property with several buildings.1,3
- Coinsurance: either no coinsurance clause, or one offset by an agreed amount provision of at least the full estimated insurable value.1,3
- Insurable value is the cost to replace, repair or reproduce the property, not counting land. The lender may take it from the insurer's estimate, the appraisal, a commercial contractor or a valuation vendor. Freddie Mac notes that using the insurer's own estimate helps avoid coverage disputes after a claim.1,3
- Total insurable value (TIV), the base for percentage deductibles, is the value of the covered property plus business income values.1,3
Blanket policies are allowed if the coverage is as good as a single-property policy. The blanket limit must be one shared per-occurrence limit and must be large enough to cover the largest TIV it insures. The lender reviews the schedule of values and how much insured value sits in one area; Freddie Mac says that review must not rest on probable maximum loss modeling alone.1,3
Maximum deductibles
| Deductible | Maximum |
|---|---|
| All other perils, limit for the property alone | $50,000 if insurable value is under $10 million; $100,000 at $10 million or more |
| All other perils, blanket limit | $250,000 |
| Wind/hail, percentage | 5% of the property's TIV; any stated minimum no more than $100,000 (limit for the property alone) or $250,000 (blanket limit) |
| Named storm and earthquake, percentage | 7.5% of the property's TIV, with the same caps on a stated minimum |
| Wind/hail, named storm and earthquake, flat dollar amount | $50,000 or $100,000, as for all other perils. Freddie Mac allows $250,000 on a blanket limit; Fannie Mae's table gives no blanket figure. |
| Rent loss, most perils | The property deductible, or a 72-hour waiting period |
| Rent loss for named storm, flood and earthquake | 15 days or $100,000. Fannie Mae applies this to terrorism too; Freddie Mac to wind/hail. |
| Flood building coverage other than NFIP | $50,000 per building with 10 or fewer buildings in a flood zone; $500,000 per occurrence with more than 10 |
| NFIP flood | The highest NFIP deductible is acceptable |
The percentage comes from that property's own TIV, not the total on a blanket schedule. On a property with $20 million of TIV, the wind/hail deductible may be up to 5%, or $1,000,000, and the named storm deductible up to 7.5%, or $1,500,000. A flat dollar wind/hail deductible on the same property may not exceed $100,000 if its insurable value is $10 million or more.1,3
Higher "expanded" deductibles of $100,000 (under $10 million) or $150,000 ($10 million or more) are possible by exception. They need borrower liquidity of at least 4 times the deductible, a loan that is current and has not been delinquent in the past 12 months, an acceptable loan rating and a property in good condition. Freddie Mac allows them only on existing loans, not for NFIP, windstorm or earthquake, and one policy term at a time.1,3
Aggregate deductibles are accepted (Fannie Mae says they may exceed the per-occurrence caps) if the full aggregate amount is funded and held in a segregated borrower account, the lender's tax and insurance escrow, or by a third party for the borrower.1,3
Rent loss, ordinance or law and other required coverage
- Rent loss (business income): 12 months of actual loss sustained, or a year of income based on the latest annual effective gross income, or net operating income plus continuing expenses. Loans with an unpaid balance of $35 million or more need a 90-day extended period of indemnity option.1,3
- Equipment breakdown: required when the property has a high-pressure or centralized HVAC boiler, water heater or other vessel in operation that the state or city regulates, for at least 100% of the insurable value of each building housing it. If a different insurer writes it, both policies need a joint loss agreement.1,3
- Terrorism: required on every loan, for property damage and liability.1,3
- Localized perils: a property in an area prone to sinkhole, mine subsidence, volcanic eruption or avalanche needs those perils covered.1,3
- Builder's risk: required during construction or major renovation when the main property policy does not cover the work.1,3
Ordinance or law coverage is required only when the property is legally nonconforming under current building, zoning or land use law. Fannie Mae requires it for all perils, including one insured on a separate policy.1,3
| Coverage | Minimum |
|---|---|
| A: loss to the undamaged portion | Insurable value (100% for one building, 90% for several) minus the damage threshold in the local ordinance; 50% of insurable value if the ordinance states none |
| B: demolition and debris removal | 10% of insurable value |
| C: increased cost of construction | 10% of insurable value |
| D: increased period of restoration | Required if any building has 5 or more stories |
In Fannie Mae's example, a single building with $10 million of insurable value and a 75% ordinance threshold needs $2.5 million of Coverage A. If A, B and C share one limit, it must be at least $4.5 million, the sum of the three.1,3
Windstorm and named storm
- If the main policy excludes wind, a separate wind policy or endorsement is required. The named storm rules apply in counties the insurer rates Tier 1 for windstorm.1,3
- On a blanket policy, the named storm limit must be at least 90% of the TIV of the largest single property covered.1,3
- Storm surge: if the named storm policy does not cover flooding from storm surge, buildings in the FEMA 500-year flood zone (shaded Zone X, formerly Zone B, with a 0.2% annual chance of flooding) need flood insurance at the highest NFIP limits or the equivalent.1,3
Flood insurance
- Required for any income-producing building wholly or partly in a FEMA special flood hazard area whose zone starts with A or V, and for any property in a Coastal Barrier Resources System or Otherwise Protected Area.1,3
- Amount: at least the insurable value of the first 2 floors above grade plus anything below grade, plus borrower-owned contents.1,3
- Private flood policies must pay replacement cost with no deduction for depreciation and be at least as broad as the NFIP standard flood policy.1,3
- A property with buildings in a flood zone in a community that does not take part in the NFIP is not eligible.1,3
- A building comes out of a flood zone only with an updated FEMA determination based on a LOMA, LOMR or LODR.2,3
Where Fannie Mae and Freddie Mac differ
| Rule | Fannie Mae | Freddie Mac |
|---|---|---|
| AM Best rating used (A- or better at both) | General policyholder rating | Financial strength rating |
| Margin clause and inflation guard | A margin clause should not be used to set compliant limits; the policy should carry inflation guard | Recommends inflation guard |
| Blanket limit reinstatement | Must reinstate after a loss, except flood, earthquake and terrorism | Lender confirms whether it reinstates; per-policy aggregates accepted for flood, earthquake and terrorism. Named storm blanket limits must reinstate. |
| Named storm limit, standalone policy | At least 90% of TIV; not set from probable maximum loss alone | The regular property limits (100% or 90% of insurable value) |
| State wind pool | Will consider a state plan or state-run wind pool when named storm coverage is not available | At least 100% of TIV, the same deductible caps, and an agreed amount provision or a coinsurance clause of 80% or less |
| Expanded deductible rating tests | Loan rated Pass; property condition 2 or better | Risk rating of 6 or less; property in average or better condition |
| Flood rent loss | Required for each required coverage, flood included | 12 months of rent loss for each building in a flood zone, inside the flood amount |
| Flood outside A and V zones | May be required in Zone X or D, for example for storm water flooding or nearness to a flood zone boundary | May be required, for example for a history of flooding or storm surge risk |
| Buildings exempt from flood | Sheds, pump houses and storage buildings (but not clubhouses or pool houses) | Low-value non-residential buildings such as maintenance buildings, storage sheds, carports, laundry buildings and gatehouses |
| Building remapped into a flood zone | Flood insurance within 45 days after the servicer is notified | Flood insurance no later than 120 days after the map change takes effect |
| Cancellation notice to the mortgagee | 10 days for nonpayment, 30 days otherwise, unless the loan documents say otherwise | 10 days for nonpayment or nonrenewal, 30 days otherwise, unless state law says otherwise |
| Mortgagee clause | Fannie Mae, its successors and/or assigns, as their interest may appear, c/o the lender | Freddie Mac, its successors and assigns, c/o the seller/servicer |
| Temporary evidence at closing | ACORD 28 with ACORD 25; ACORD 75 binder; or a joint borrower and broker letter if no ACORD certificate is available | ACORD 27 or 28, MBA evidence form, ACORD 75 binder, declarations pages or the full policies |
| Permanent evidence | Full policy copy within 90 days after delivery; the MBA evidence form only for loans of $10 million or less. Declarations pages (except NFIP), binders and certificates are not accepted. | Policy copies with all endorsements and exclusions, or the MBA evidence form |
| Exception requests at origination | At least 72 hours before rate lock | Processed before rate lock for standard delivery loans |
Renewal reviews and force-placed insurance
Both agencies require the servicer to review the borrower's insurance at every renewal, and at least once a year, against the guide and the loan documents.2,3
| Step | Deadline |
|---|---|
| Ask the borrower for renewal evidence | No later than 60 days before the policy expires |
| Decide whether the renewal complies and tell the borrower of any gap | Within 15 days after receiving evidence or the renewal date, whichever comes first |
| Fix gaps: compliant policy or endorsement, waiver, or force-placed coverage | Within 60 days after notifying the borrower |
| Still not fixed | Servicer files a non-monetary default request and sends a reservation of rights letter (Form 4804) |
| Full renewal policy on file | Within 90 days after renewal |
At Fannie Mae, the servicer must buy the required coverage at the borrower's expense as soon as the borrower fails to keep acceptable insurance, or when the carrier is downgraded below the required rating if the loan documents allow it, and may charge the borrower reasonable costs of getting it.2
| Situation | Servicer must |
|---|---|
| Coverage will lapse within 3 days and renewal is not confirmed | Force place |
| Coverage in force is under 80% of the required amount | Contact the borrower within 2 days; force place or ask for a waiver if not fixed within 15 days |
| Coverage is more than 80% but under 100% of the required amount, or the policy falls short in another way | Contact within 5 days; force place or ask for a waiver if not fixed within 30 days |
| A gap still open 90 days after an exception request | Force place, and may charge the borrower |
Changes that reach existing loans at renewal
- Fannie Mae Guide Update 26-27 (effective October 26, 2026) clarified general policy rules, strengthened blanket policy rules, expanded the evidence of insurance and ordinance or law requirements, and added named storm guidance. It applies to loans under application from October 26, 2026 and to policy renewals from January 18, 2027.4
- Freddie Mac Bulletin M2026-5 (October 20, 2026) requires blanket limits to cover the largest TIV and lets ordinance or law Coverage A use 90% of insurable value for properties with several buildings. It applies to loans under application from October 26, 2026 and to policy renewals from December 18, 2026.6
How Cloudbreak helps
Policy review
Your deductibles, limits, exclusions and roof endorsements read against each property, with questions for your broker; a licensed broker approves every report.
Pre-loss documentation
A dated record of every roof section, elevation and rooftop unit, in photos, drone video and notes, with original files and timestamps intact.
Storm monitoring
Our proprietary predictive storm engine, built with AI and backed by meteorologists, watches every building against its own roof-based thresholds; our on-call team picks up urgent matches within 15 minutes, day or night.
Questions
- Does Fannie Mae allow actual cash value roof coverage on apartment loans?
- Yes. Fannie Mae requires replacement cost coverage but lets roofs be insured at actual cash value. Freddie Mac allows the same for roof coverings.1,3
- What is the maximum wind deductible on a Fannie Mae or Freddie Mac multifamily loan?
- 5% of the property's total insurable value for wind/hail and 7.5% for named storm, with any stated minimum no higher than $100,000 on a limit for the property alone or $250,000 on a blanket limit. A flat dollar wind/hail deductible on a limit for the property alone may not exceed $50,000, or $100,000 when insurable value is $10 million or more.1,3
- Do new Fannie Mae or Freddie Mac insurance requirements apply to an existing loan?
- Yes, at renewal. Each update sets one date for new loans and a later date for policy renewals on existing loans: January 18, 2027 for Fannie Mae's October 26, 2026 update and December 18, 2026 for Freddie Mac's October 20, 2026 bulletin.4,6
Cloudbreak
The owner-side property protection team for commercial and multifamily owners in storm country: a dated record of every building, nightly storm checks and a review of your policy, before a loss.
Sources
Written by the Cloudbreak team. Numbers, dates and rules cite the published sources below.
- 1. Fannie Mae: Multifamily Selling and Servicing Guide, Part II Chapter 5: Property and Liability Insurance (effective October 26, 2026)
- 2. Fannie Mae: Multifamily Selling and Servicing Guide, Part V Section 413: Property and Liability Insurance (effective October 26, 2026)
- 3. Freddie Mac: Multifamily Seller/Servicer Guide, Chapter 31: Insurance Requirements (updated October 20, 2026)
- 4. Fannie Mae: Guide Update 26-27: Property and Liability Insurance (effective October 26, 2026)
- 6. Freddie Mac: Multifamily Seller/Servicer Guide Bulletin M2026-5 (October 20, 2026)