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Mass Condo Associations - "Walls In" Coverage


What is “Walls In” Coverage and when does a Borrower need it?

Fannie Mae requires that lenders verify that Hazard Insurance for all common interest developments including PUD’s and condominium projects with attached units covers fixtures, equipment, and other personal property inside individual units. 

The updated policy now requires that the borrower obtain a “Walls-In” coverage policy (commonly known as HO-6 policy) unless the lender can document that the master policy provides the same interior unit coverage.  The master policy must include replacement of improvements and betterment coverage to cover any improvements that the borrower may have made to the unit. 

The HO-6 insurance policy, also called a “Walls In” policy must provide coverage in an amount that is no less than 20 percent of the condominium unit’s appraised value.  The standard requirement for a 5% deductible applies. 

Fannie Mae requires individual insurance policies for each unit mortgage in a PUD (Planned Unit Development) project.  If the project’s legal documents allow for blanket insurance policies to cover both the individual units and the common elements, we will accept the blanket policies in satisfaction of our insurance requirements.  The PUD association master insurance policy must cover all of the common elements except for those that are normally excluded from coverage, such as land, foundation, excavations, etc.  Fixtures and building service equipment that are considered part of the common elements, as well as common personal property and supplies, should be covered. 

The bottom line is that in a common interest development we need evidence the Master Insurance Policy provides the same interior unit coverage as an HO-6 policy in writing from the insurance company.  Or the borrower will need to provide an HO-6 policy for coverage equal to 20% of the appraised value.

I hope this information helps for smooth closings without last minute insurance issues to resolve.  If you have any questions please feel free to contact me anytime.

Remember Call us at (800) 550-INSURE , walk in or visit our website www.savinjones.com  to get a Free no-obligation quote!!   We could save you Hundreds while increasing your insurance coverage.

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