B7-3-03, Master Property Insurance Requirements for Project Developments (08/05/2026)

This topic covers requirements for master property insurance policies covering the common elements and residential structures of project developments. 

The requirements applicable to condo projects in this topic also apply to two- to four-unit condos and detached condos, unless stated otherwise. 

For the purposes of this topic and  B7-3-04, Property Insurance Requirements for Individual Units in a Project DevelopmentB7-3-04, Property Insurance Requirements for Individual Units in a Project Development, the following definitions apply:

• Common elements refers to insurable, non-residential elements of a project development. Examples include, but are not limited to, clubhouses, parking areas or structures, and recreational facilities.
• Residential structures refers to the insurable elements of a building that contains one or more residences.

See Named Insured for Property and Flood Insurance in B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation RequirementsB7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements for the named insured requirements.

The requirements for individual property insurance policies will vary based on the homeowners' association (HOA) or co-op corporation's legal documents and the master property insurance policy. The following table provides the requirements based on the project type.

To the extent the master property insurance policy does not cover the interior of the unit or improvements to the unit, the borrower must maintain an individual unit owner property insurance policy (see B7-3-04, Property Insurance Requirements for Individual Units in a Project DevelopmentB7-3-04, Property Insurance Requirements for Individual Units in a Project Development for additional requirements).

Master property insurance coverage policies covering project developments should be written on a "Special" coverage form or equivalent. At a minimum, the coverage must include the perils covered by a commercial "Broad" coverage form, as listed in the following table.

If a master property insurance policy excludes or limits coverage of any of the required perils, the HOA or co-op corporation must obtain an acceptable policy (e.g., stand-alone policy) which provides adequate coverage for the limited or excluded peril (see B7-3-05, Additional Insurance RequirementsB7-3-05, Additional Insurance Requirements for additional information).

When required, a master property insurance policy must be maintained with premiums paid as a common expense by the HOA or co-op corporation, as applicable. The policy must cover all insurable property elements. Common personal property and supplies should be covered, if applicable.

Coverage sufficiency for a master property insurance policy is determined based on the coverage amount and the policy's loss settlement terms.

Coverage Amount

The master property insurance coverage amount must equal at least 100% of the estimated replacement cost value of the project improvements, including common elements and residential structures.

The lender or servicer may rely on any one of the following to document that the coverage amount is sufficient:

• Guaranteed replacement cost coverage, or its equivalent;
• Extended replacement cost coverage, or its equivalent;
• A replacement cost value estimate provided by the insurer;
• The project's insurance risk appraisal; or
• A statement from the insurer or other applicable professional with appropriate expertise to make such a determination.

Loss Settlement

The master property insurance policy must provide coverage on a replacement cost basis, with the exception of roofs. 

Roofs must be insured, but do not have to be insured on a replacement cost basis.

Note: Fannie Mae recognizes that some insurers may issue policies that provide coverage on an actual cash value basis for personal property and certain property elements. In the event the lender or servicer sees such terms in a master property insurance policy, this is acceptable.

The following table describes the maximum allowable deductible for master property insurance policies covering project developments. If the policy includes separate deductibles for different required perils, such as windstorm or wildfire, each individual deductible must comply with the applicable maximum deductible.

Note: A deductible buy-back insurance policy purchased by the HOA or co-op corporation may be used to meet Fannie Mae's master property insurance policy maximum deductible requirements, provided the policy meets all other property insurance requirements in Chapter B7-3, Property and Flood Insurance, including insurer rating requirements.

The following table describes special coverage requirements applicable to condo, co-op, and PUD master property insurance policies:

Master property insurance policies for condo projects must be endorsed with a Condominium Association Coverage Form or its equivalent. The endorsement must include the following provisions or comparable language:

• Recognition of an Insurance Trustee: If you name an insurance trustee, we will adjust losses with you, but we will pay the insurance trustee. If we pay the trustee, the payments will satisfy your claims against us.
• Waiver of Rights of Recovery: We waive our rights to recover payment from any unit-owner of the condominium that is shown in the declarations.
• Unit-owner's Insurance: A unit-owner may have other insurance covering the same property as this insurance. This insurance is intended to be primary, and not to contribute with such other insurance. 

When a project is under development, it may be covered by the builder/developer's property insurance policy if the policy provides equivalent coverage to the requirements for project developments in this topic. When property coverage ceases per the terms of the builder/developer's policy, the HOA or co-op corporation must obtain a master property insurance policy in accordance with Fannie Mae's requirements.

Separate projects under development by the same developer will be considered affiliated during the period when control of the project has not yet transferred from the builder/developer to the individual owners or related HOA or co-op corporation. The affiliated status of the subject project ends when the property coverage ceases per the terms of the builder/developer's policy.

Except as described below, unaffiliated projects may not share a master property insurance policy. Each project must maintain its own policy that meets Fannie Mae requirements, as detailed throughout this topic.

If a property insurance policy that covers multiple unaffiliated projects provides a dedicated coverage amount for each individual covered project, the policy structure may provide equivalent coverage to Fannie Mae's coverage amount requirements. The coverage amount dedicated to the subject project must be sufficient to cover the full replacement cost value of the project improvements including the common elements and residential structures.

The lender or servicer must review the insurance policy and any other associated documents needed to adequately evaluate the insurance coverage. The HOA or co-op corporation must be protected in the same manner as if it maintained a master property insurance policy. The coverage of each insured project cannot be affected by any actions or omissions of unaffiliated projects covered by the same policy. Additionally, all other master property insurance requirements for project developments must be met.

The lender or servicer must document how they determined the applicable policy provides acceptable coverage as detailed above. A copy of the policy, along with the lender's or servicer's documentation must be maintained in the loan file.