Fannie Mae's 2025 condo insurance requirements: a title team checklist

Master Policy Requirements and Coverage Limits

Fannie Mae's Selling Guide B7-3-03 governs master property insurance requirements for condominium project developments. The master policy must cover all insurable common elements and residential structures, with premiums paid as a common expense by the HOA. For title teams, verifying the existence, amount, and terms of this policy is a non-negotiable pre-funding step.

100% Replacement Cost Requirement

The lender or servicer must verify that the master property insurance coverage amount equals at least 100% of the replacement cost value of the project improvements, including common elements and residential structures, as of the current policy effective date. The source of verification may be the property insurer, an independent insurance risk specialist, a replacement cost estimator, or an insurance risk appraisal.

Under LL-2026-03, Fannie Mae revised how replacement cost value must be documented. Lenders may now rely on insurer statements, appraisals, or other professional estimates to confirm coverage sufficiency, rather than independently documenting values. This streamlines the process but places greater reliance on the credibility of the insurance provider's valuation.

Special Form Coverage

Master property insurance policies must be written on a "Special" coverage form or equivalent. At minimum, the coverage must include all perils covered by a commercial "Broad" form. Policies written on a "Basic" form or that limit, depreciate, or reduce losses at anything other than replacement cost are not acceptable. Title teams should confirm the coverage form type by reviewing the policy declarations page.

Roof Coverage and the ACV Change

One of the most consequential changes in LL-2026-03 is the removal of the requirement to insure roofs at full replacement cost. Master policies may now permit certain roof losses, typically wind or hail, to be settled on an actual cash value (ACV) basis. The remainder of the structure must still be covered on a replacement cost basis. Title teams should verify which roof settlement method applies and flag any policy that settles the entire structure on an ACV basis.

Shared Master Policies Across Unaffiliated Projects

Fannie Mae now formally permits shared master insurance policies covering multiple unaffiliated condominium projects, provided the policy structure clearly allocates a dedicated coverage amount to each participating project. The coverage amount dedicated to the subject project must be sufficient to cover the full replacement cost value of that project's improvements. Title teams must obtain the policy and any allocation schedules to confirm the subject project is adequately covered.

Deductible Caps and the New Per-Unit Rule

Deductible compliance is one of the most common reasons condo files are kicked back by underwriters. Fannie Mae maintains two overlapping deductible rules that title teams must verify simultaneously.

The 5% Per-Occurrence Cap

The maximum allowable deductible for all required property insurance perils is 5% of the master property insurance coverage amount per occurrence. When a policy includes multiple deductibles, such as a separate windstorm deductible or roof deductible, the total amount for all deductibles applicable to a single occurrence must still be no greater than 5% of the insurance coverage amount.

The $50,000 Per-Unit Cap (Effective July 1, 2026)

Effective for all loans with application dates on or after July 1, 2026, master property insurance policies may include a per-unit deductible of up to $50,000. This change acknowledges the reality of high-deductible policies in coastal and catastrophe-prone markets. However, when a per-unit deductible exceeds 5% of the master policy coverage amount, the borrower's individual property insurance policy must include:

• Coverage for the applicable peril(s);
• Coverage for master policy deductible assessments levied on the unit owner by the HOA; and
• Loss assessment coverage in an amount sufficient to cover assessments in excess of 5% of the master policy coverage amount, divided by the number of units.

Title teams must obtain evidence of the borrower's supplemental coverage when the master policy carries a per-unit deductible above the 5% threshold.

Deductible Buy-Back Policies

A deductible buy-back insurance policy purchased by the HOA may be used to meet Fannie Mae's deductible requirements, provided the buy-back policy meets all other property insurance requirements, including insurer rating standards. Title teams should request a copy of any buy-back policy and confirm it is active for the current policy term.

Required Perils and Special Coverage Endorsements

The master policy must cover a comprehensive list of perils. If the policy excludes or limits coverage for any required peril, the HOA must obtain an acceptable stand-alone policy that provides adequate coverage for the excluded risk.

Required Peril	Notes for Title Teams
Fire	Standard on virtually all commercial property forms.
Lightning	Often bundled with fire coverage; verify explicit inclusion.
Explosion	Confirm coverage includes both internal and external explosion.
Windstorm (including named storms)	Check for separate named-storm or hurricane deductibles.
Hail	Common exclusion in some markets; verify explicitly.
Smoke	Usually included under fire peril; confirm no sub-limits.
Aircraft or Vehicles	Verify coverage for damage from aircraft and vehicles.
Riot or Civil Commotion	May be excluded in some jurisdictions; require stand-alone if omitted.
Vandalism	Standard on Broad and Special forms; verify on Basic forms.
Sprinkler Leakage	Critical for multi-story buildings; confirm no exclusion.
Sinkhole Collapse	Essential in karst regions; may require separate endorsement.
Volcanic Action	Verify inclusion, especially in Pacific Northwest and Hawaiian markets.
Falling Objects	Confirm coverage for debris and falling objects.
Weight of Snow, Ice, or Sleet	Critical in northern climates; verify no roof-specific exclusion.
Water Damage	Distinguish between accidental discharge and flood; flood requires separate coverage.

Condominium Association Coverage Form Endorsement

Master policies for condo projects must be endorsed with a Condominium Association Coverage Form or its equivalent. The endorsement must include provisions for recognition of an insurance trustee, waiver of rights of recovery against unit owners, and clarification that the master policy is primary and does not contribute with unit-owner policies. Title teams should obtain a copy of this endorsement and confirm it is attached to the current policy.

Ordinance or Law and Boiler & Machinery Coverage

Beyond standard peril coverage, Fannie Mae mandates two specialized coverage types that title teams frequently overlook: ordinance or law coverage and boiler and machinery coverage.

Ordinance or Law Coverage

The master policy must include Building Ordinance or Law coverage comprising three components:

• Coverage A: Loss to the undamaged portion of a building;
• Coverage B: Demolition costs; and
• Coverage C: Increased costs of construction.

This coverage may be included in the property coverage form or obtained as an endorsement. It is not required if it is not obtainable in the insurance market available to the association, but the unavailability must be documented. Title teams should verify either the inclusion of this coverage or a written confirmation from the agent that it is unobtainable.

Boiler & Machinery / Equipment Breakdown Coverage

If the condominium project has central heating, cooling, or elevators, the HOA must maintain Boiler & Machinery coverage, also known as Equipment Breakdown or Mechanical Breakdown coverage. The coverage amount must equal the lesser of $2 million or the replacement cost value of the building(s) housing the equipment. This coverage may be included in the property form, obtained as an endorsement, or purchased as a stand-alone policy. Title teams should confirm the presence of this coverage for any project with shared HVAC or elevator systems.

Fidelity Bond and Crime Coverage Requirements

Fidelity coverage protects the association and lenders against loss due to fraudulent or dishonest acts by board members, managers, or employees who handle HOA funds. Fannie Mae's requirements are specific and tied to project size.

Coverage Thresholds

For condominium projects with 20 or more units, the HOA must maintain fidelity insurance covering at least three months of HOA assessments plus all reserve funds. If the property manager handles association funds, the manager must be named as an insured under the fidelity policy, or the HOA must maintain a separate crime policy covering the manager. For projects with fewer than 20 units, fidelity coverage is recommended but not mandated by Fannie Mae; however, many lenders impose their own minimums.

What Title Teams Must Verify

Title teams should obtain a certificate of fidelity insurance showing the coverage amount, the named insureds, and the policy effective dates. The coverage amount must be compared against the association's annual assessment income and reserve balances to confirm sufficiency. If the manager is not named, request a separate crime policy or an endorsement adding them.

ALTA Endorsements for Condo Unit Title Insurance

Title insurance for condominium unit mortgages requires specific endorsements that protect Fannie Mae against title risks unique to shared-ownership structures. The Selling Guide B7-2-04 sets out the exact requirements.

ALTA 4 and 4.1 — Condominium Endorsements

For condo unit mortgages, Fannie Mae requires an ALTA 4 or 4.1 endorsement (or equivalent) attached to each title policy or incorporated into the policy text. These endorsements protect against loss from violations of covenants, conditions, or restrictions, and confirm that the mortgage is superior to liens for unpaid common expense assessments. The title policy must also insure that the unit does not encroach on another unit or common elements, and that real estate taxes are assessable only against the individual unit and its undivided interest in the common elements.

ALTA 6 — Variable Rate Mortgage Endorsement

For condominium loans with adjustable or variable interest rates, an ALTA 6 series endorsement may be required. This endorsement insures the validity and priority of the mortgage lien regardless of future interest rate changes. Title teams closing ARM condo loans should verify whether the lender requires ALTA 6, 6.1, or 6.2 based on the loan product.

ALTA 7 — Manufactured Housing Conversion Endorsement

ALTA 7 series endorsements apply when a manufactured home is converted from personal property to real property. While not specific to traditional condominium structures, title teams occasionally encounter condo developments that include manufactured housing units or mixed-use projects. In these cases, an ALTA 7, 7.1, or 7.2 endorsement is required to treat the home as real property and confirm proper retirement of any certificate of title.

Common Elements and Association Ownership

If the HOA owns the common elements separately, the title policy on those areas must show that title is free and clear of objectionable liens, including statutory or mechanic's liens for improvements begun before the title policy was issued. Title teams should confirm whether common areas are owned as tenants in common by unit owners or separately by the association, as this affects the scope of title coverage required.

How Title Teams Verify Compliance Before Closing

Title teams act as the final checkpoint between the HOA's insurance program and the lender's funding conditions. A systematic verification process prevents last-minute surprises and reduces the risk of post-closing repurchase exposure.

The Insurance Verification Checklist

Title teams should request and review the following documents for every condominium closing:

• Copy of the current master property insurance policy and all endorsements;
• Certificate of insurance showing the individual unit is covered under the master policy;
• Proof of deductible buy-back policy, if applicable;
• Borrower's individual HO-6 policy or evidence of walls-in coverage;
• Proof of loss assessment coverage when per-unit deductibles exceed the 5% threshold;
• Fidelity bond certificate showing coverage amount and named insureds;
• Boiler & Machinery policy or endorsement for projects with central systems;
• Ordinance or Law coverage confirmation or agent letter documenting unavailability;
• Flood insurance declaration page if the project is in a FEMA Special Flood Hazard Area;
• Title policy with ALTA 4/4.1 endorsement and any required variable-rate or manufactured housing endorsements.

Cross-Referencing Against the Selling Guide

Each document should be cross-referenced against the applicable Selling Guide section: B7-3-03 for master property insurance, B7-3-04 for individual unit coverage, B7-3-05 for additional insurance requirements, and B7-2-04 for title insurance endorsements. Discrepancies should be flagged immediately and either cured or documented with a lender-approved exception.

Communication with the HOA and Insurance Agent

When coverage gaps are identified, the title team should communicate directly with the HOA board, property manager, or insurance agent. In many cases, the agent can provide a letter of explanation, an endorsement amendment, or a binder confirming pending coverage changes. All communications should be documented in the closing file.

Common Denial Reasons and How to Fix Them

Condo files are denied or suspended for predictable insurance-related reasons. Title teams that understand these triggers can resolve them before they reach the underwriter's desk.

Master Policy Deductible Exceeds 5%

This is the most common denial reason. If the master policy deductible is 6% or 10% of the coverage amount, the file will be rejected unless the borrower carries sufficient loss assessment coverage. The fix is to obtain an HO-6 policy with loss assessment coverage equal to the deductible amount divided by the number of units, or to have the HOA purchase a deductible buy-back policy.

Missing Condominium Association Coverage Form

Some agents issue a standard commercial property policy without the condo-specific endorsement. The fix is to request that the insurer attach the Condominium Association Coverage Form or equivalent endorsement confirming primary coverage, waiver of subrogation, and insurance trustee recognition.

Inadequate Fidelity Coverage

If the fidelity bond covers only $100,000 but the association collects $800,000 in annual assessments, the coverage is clearly insufficient. The fix is to require the HOA to increase the fidelity limit to at least three months of assessments plus reserves, or to obtain a standalone crime policy.

Missing Boiler & Machinery Coverage

Projects with elevators or central chillers frequently lack Equipment Breakdown coverage. The fix is to have the HOA add the coverage by endorsement or purchase a stand-alone policy with at least $2 million in limits, or the replacement cost of the equipment building, whichever is less.

Title Policy Without ALTA 4/4.1

Some title agents issue a standard owner's or lender's policy without the required condominium endorsement. The fix is to request a policy amendment or reissue with the ALTA 4 or 4.1 endorsement attached before closing.

Freddie Mac Parallel Requirements

Freddie Mac issued a corresponding bulletin on March 18, 2026, aligning its condo insurance standards with Fannie Mae's LL-2026-03. The two GSEs are now functionally identical on the following points:

• Roof coverage: Both permit ACV settlement for roof losses;
• Inflation guard: Both eliminated the inflation guard requirement for condo projects;
• Per-unit deductible: Both adopted the $50,000 per-unit deductible cap effective July 1, 2026;
• Individual unit coverage: Both updated when a borrower must obtain an individual property insurance policy and what coverage sufficiency means for HO-6 policies;
• Reserve funding: Both increased minimum reserve requirements from 10% to 15% of annual budgeted assessment income effective January 4, 2027.

For title teams, this alignment simplifies compliance. A single verification process that satisfies Fannie Mae's Selling Guide will generally satisfy Freddie Mac's requirements as well. However, teams should still verify the specific investor on each loan, as portfolio lenders or private investors may impose overlays that exceed GSE standards.

Frequently Asked Questions

What is the new Fannie Mae per-unit deductible cap for condo master policies?

Effective July 1, 2026, Fannie Mae limits per-unit deductibles on condo master property insurance policies to $50,000. Unit owners must carry supplemental coverage sufficient to cover the deductible amount through their individual HO-6 policy or loss assessment coverage.

Does Fannie Mae still require condo master policies to insure roofs at replacement cost?

No. Under LL-2026-03, Fannie Mae no longer requires roofs to be insured at full replacement cost. Master policies may now settle certain roof losses, typically wind or hail, on an actual cash value (ACV) basis. The rest of the structure still requires replacement cost coverage.

What ALTA endorsements are required for condo unit title insurance under Fannie Mae?

For condo unit mortgages, Fannie Mae requires an ALTA 4 or 4.1 endorsement (Condominium Endorsement) or its equivalent. For variable-rate condo loans, an ALTA 6 series endorsement may also be required. ALTA 7 series endorsements apply to manufactured housing conversions and are unrelated to standard condo transactions.

What is the maximum master policy deductible allowed by Fannie Mae for condo projects?

The general rule is that the master policy deductible must not exceed 5% of the policy's coverage amount per occurrence. Beginning July 1, 2026, a separate per-unit deductible cap of $50,000 also applies. If multiple deductibles apply to a single occurrence, their total cannot exceed 5% of the coverage amount.

Is inflation guard coverage still required on condo master insurance policies?

No. Fannie Mae retired the inflation guard coverage requirement for condominium project developments under LL-2026-03. If inflation guard or an equivalent extended replacement cost endorsement is not obtainable in the insurance market available to the association, it is no longer required for compliance.

What fidelity bond coverage does Fannie Mae require for condominium associations?

For condominium projects with 20 or more units, Fannie Mae requires fidelity insurance covering at least three months of HOA assessments plus all reserve funds. If the property manager handles association funds, they must be named as an insured under the fidelity policy or a separate crime policy.

How do title teams verify Fannie Mae condo insurance compliance at closing?

Title teams verify compliance by obtaining the current master policy, all endorsements, a certificate of insurance showing the unit is covered, and the HOA's proof of fidelity, boiler and machinery, and ordinance or law coverage. They cross-check coverage amounts, deductibles, and named insureds against Fannie Mae Selling Guide B7-3-03 requirements.

Do Freddie Mac condo insurance requirements mirror Fannie Mae's 2025 updates?

Yes. Freddie Mac issued a parallel bulletin on March 18, 2026, aligning its condo insurance requirements with Fannie Mae's LL-2026-03 updates. Both GSEs now permit ACV roof coverage, eliminated inflation guard requirements, and adopted the $50,000 per-unit deductible cap effective July 1, 2026.

Key Takeaways

• Master policy coverage must equal 100% of replacement cost for all project improvements, and the policy must be written on a Special form or equivalent with all required perils included.
• The $50,000 per-unit deductible cap takes effect July 1, 2026. When this cap is used, borrowers must carry supplemental HO-6 coverage or loss assessment coverage to bridge the gap.
• Roofs may now be insured on an ACV basis, but the remainder of the structure must still be covered at replacement cost. Verify the settlement method on the declarations page.
• Inflation guard is no longer required for condo project master policies, which should reduce premium pressure for associations in tight markets.
• Ordinance or Law and Boiler & Machinery coverage remain mandatory unless documented as unobtainable in the association's insurance market.
• Fidelity coverage is required for projects with 20 or more units, covering three months of assessments plus all reserve funds, with the property manager named as an insured if they handle funds.
• ALTA 4 or 4.1 is mandatory for condo unit title insurance. Verify the endorsement is attached to the title policy before closing.
• Fannie Mae and Freddie Mac requirements are now aligned, simplifying compliance for loans sold to either GSE.

Requirement	Fannie Mae Standard	Effective Date
Master policy coverage amount	100% of replacement cost value	Current
Coverage form	Special form or equivalent (minimum Broad)	Current
Roof settlement	ACV permitted for certain roof losses	March 18, 2026
Per-occurrence deductible cap	5% of policy coverage amount	Current
Per-unit deductible cap	$50,000 maximum	July 1, 2026
Inflation guard	No longer required	March 18, 2026
Ordinance or Law coverage	Coverage A, B, and C required if obtainable	Current
Boiler & Machinery	Required if central HVAC/elevators; lesser of $2M or RCV	Current
Fidelity bond (20+ units)	3 months assessments + all reserve funds	Current
Condo title endorsement	ALTA 4 or 4.1 required	Current
Minimum reserve funding	15% of annual budgeted assessment income	January 4, 2027