Insurance Requirements Training 10/21/15

Transcription

1 Insurance Requirements Training 10/21/15

2 Objectives At the end of this training you will be able to: Understand insurance coverage requirements Calculate minimum required coverage Identify insurance policy timeline requirements Use the date/time calculator Understand minimum policy requirements Identify acceptable proof of payment 2

3 Insurance Requirements - SFR Hazard Insurance protects the property against loss or damage, including damage due to fire. The basic minimum hazard insurance requirements are: Single Family Residence Conventional (FNMA/FHMLC) & Jumbo The amount of insurance coverage must at least equal the lesser of: ~ of the Cost Estimate (Insurable Value) as provided by the insurer ~ The loan amount provided it is at least 80% of the Cost Estimate Guaranteed Replacement Cost (regardless of cost) Policy must reflect Guaranteed Replacement Cost, Full Replacement Cost or 100% replacement cost coverage Maximum Deductible up to 5% of the face value, including any separate or endorsement policy Note: On "No Appraisal" refinances or refinances with a 2075 or 2055 appraisal, coverage equal to the Loan Amount is acceptable 3

4 Insurance Requirements - SFR All other products (FHA/VA/USDA) The amount of insurance coverage must at least equal the lesser of:./ Total loan amount./ Total estimate cost-new from appraisal./ 100% Replacement Cost./ Cost Estimator from insurancecompanyshowing maximum insurable value Guaranteed Replacement Cost (regardless of cost) Policy must reflect Guaranteed Replacement Cost, Full Replacement Cost or 100% replacement cost coverage Deductible up to 5% of the face value, including any separate or endorsement policy Note: On "No Appraisal" refinances or refinances with a 2075 or 2055 appraisal, coverap equal to the Loan Amount Is acceptable 4

5 Insurance Requirements (continued) Insurable value can be determined by either the property insurer or from the appraisal report Property Insurer./ If the insurable value is determined by the property insurer, the cost estimate must be on a HOI company form or written letter from the HOI company Appraisal Report./ If the appraisal report is used to determine insurable value, it must be based on the total estimate of cost-new Z03K Full Consultant or Streamlined and HomeStyle./ Standard insurance coverage requirements apply based on the product type; HomeStyle to follow FNMA and 203k loans to follow FHA. 5

6 Determining Coverage Conventional {FNMA/FHMLC) & Jumbo " Step Description 1 Comparel the cost estimate and the loan amount 1A If the cost estimate is less than the loan amount, the cost estimate amount is required for the dw elling coverage (STOP HEIRE) 1 B If the loan amount is less than the cost estimate, go to Step 2 2 Calculate 8 0 /o of the cost estimate 2A If 80 /o of the cost estimate is equal or less than the loan amount, then the loan amount is required for dw elling coverage (STOP HERE) 28 If 80 /o of the cost estimate is greater than the loan amount, then 80 Jo of the cost estimate is required for dw elling coverage 6

7 Determining Coverage - Examples Category Property C Cost Estimate $90,000 $100,000 $100,000 Loan Amount $95,000 $90,000 $75, /o of Cost N/A $80,000 $80,000 Estimate Required $90,000 is $90,000 is $80,000 is Coverage sufficient since required since required since the the cost estimate the loan amount loan amount is is less than the exceeds 80 /o of less than 80 /o of loan amount the cost estimate the cost estimate Calculated Step 1A Step 2A Step 28 Method 7

8 Insurance Coverage PUD Attached PUD The insurance requirements will vary depending on if the Master policy includes coverage for all units and common areas or only the common areas: Building Coverage Requirements., Blanket Master Policy {includes coverage for all units and common areas)., 100% replacement cost OR., Guaranteed replacement cost endorsement., Individual Policy to cover unit {not required if master policy covers unit)., Must cover the subject property and meet coverage requirements for an SFR AND., Master policy with $1 million in coverage for common areas Tip: 100% replacement cost is assumed, unless otherwise indicated Note: Detached PUD's followsfr requirements for building coverage and do not require a master policy 8

9 Insurance Coverage - PUD PUD Liability Coverage will vary depending on if the PUD Project is New or Established./ New Project./$1 million in Bodily Injury & Property Damage./100% replacement cost for common areas./ Established Project./100% replacement cost for common areas Maximum Deductible up to 5% of the face policy amount Tip: 100% replacement cost is assumed, unless otherwise indicated Note: If there is no HOA Master Policy, a letter from the HOA is required stating there are no common areas to cover 9

10 Example #1 Detached PUD Based on the followlnsloan parameters: Conventional Loan Detached PUC/Established Project Loan Amount $87,000 I Cost New on Appraisal $124,615 Individual Policy Coverage of $144,000 No Master Policy Result ~ Detached PUD's follows SFR requirements and does not require a master policy ~ Coverage is sufficient since coverage is greater than the loan amount and the cost new on the appraisal ~Cost New exceeds loan amount (cost new x 80% = $99,692) ~Required coverage is the greater of the loan amount or 80% of the cost new 10

11 Example #2 Detached PUD Based on the following loan parameters: FHA Loan Detached PUC/Established Project Loan Amount $200,000 I Cost New on Appraisal $193,640 Individual Policy Coverage of $223,800 No Master Policy Result./ Detached PUD's follows SFR requirements and does not require a master policy./ Coverage required is equal to cost new on appraisal, since this is less than the loan amount./ Coverage is sufficient since coverage is greater than the cost new on the appraisal 11

12 Example #3 Attached PUD Based on the followinsloan parameters: VA IRRRL Attached PUD/New Project Loan Amount $351,814 I Cost New of Appraisal $269,800 Individual Policy Coverage of $283,638 Master Policy./ Property Coverage (Clubhouse/Pool} of $324,000./ Liability Coverage (Common Areas only} of $1M with Replacement Cost Result./ Building Coverage - Borrower has their own policy which exceeds the cost new on the appraisal./ Liability Coverage- Policy includes $1M in liability and states replacement cost but no %. This would be acceptable since we assume 100% replacement cost unless otherwise noted 12

13 Example #4 Attached PUD Based on the followl111 loan parameters: Conventional Semi-Detached PUD/New Project Loan Amount $258,800 I Cost New of Appraisal $243,785 No Individual Policy Coverage Master Policy./ Property Coverage of $10. 7M./ Liability Coverage of $2M Result./ Building Coverage -Coverage is sufficient and assumed at 100% replacement cost since not noted on the policy./ Liability Coverage- Policy includes $2M in liability and 100% replacement cost for the common areas is assumed, since not noted on the policy 13

14 Insurance Coverage - Condo Condo Building Coverage./ Blanket Master Policy must cover all units and common areas./ 100% replacement cost OR./Guaranteed replacement cost endorsement Uability Coverage./ $1 million Maximum Deductible up to 5% of the face policy amount Tip: 100% replacement cost is assumed, unless otherwise indicated Note: Detached Condos/Site Condo follow SFR requirements for building covera1e and require 100" replacement cost for common areas 14

15 Insurance Coverage - Condo Condo H0-6 Insurance (not required on Streamlines) Required unless Master Policy includes "walls in" coverage ~ The coverage amount is determined by the insurer and should be sufficient to repair the condo unit to its condition prior to a loss claim event (not an option for USDA loans) OR ~We will require a written statement from the agent indicating that coverage is sufficient to restore properly to condition prior to loss ~ 2096 of the Appraised Value (required on USDA loans) Policy must clearly indicate it is an H0-6 policy and/or include ''Walls In" coverage and can't exclude improvements or betterment coverage 15

16 Insurance Coverage - Condo Condo Fidelity Bond./ Fidelity insurance protects the property against loss due to employee dishonesty./ Required for projects with 20 or more units of at least 3 months HOA dues for all units (Monthly dues x 3 x #of units)./ Hawaii Only- Maximum coverage is $500 per unit, provided the total coverage is not less than $20,000 and not greater than $200,000 16

17 Example #1 Detached Condo Based on the followln1loan parameters: Conventional Loan Detached Loan Amount $300,000 Individual Policy Coverage of $258,000 I Cost Estimator letter from agent $258,000 Master Policy./ No Master Policy Provided Result./ Detached Condo's follow SFR policy for building coverage and require 100% replacement cost for common areas./ Building Coverage- Borrower has their own policy that covers the cost to rebuild based on the Cost Estimator letter provided by the agent./ Master Policy- No Master Policy provided and confirmed only common area is a shared driveway. An exception was made to accept as is and not require 100% replacement cost for common areas 17

18 Example #2 Detached Condo Based on the following loan parameters: Conventional Loan Detached Loan Amount $247,500 Individual Policy Coverage of 409,000 Master Policy./ Master Policy- covers 100% replacement cost of common areas Result./ Detached Condo's follow SFR policy for building coverage and require 100% replacement cost for common areas./ Building Coverage - Borrower has their own policy that has sufficient coverage and covers the loan amount./ Master Policy - covers 100% replacement cost of common areas as required 18

19 Example #3 Attached Condo Based on the followins loan parameters: Conventional Loan Attached Loan Amount $150,000 Individual Policy Coverage of 90,000 Master Policy./ Building Coverage of $10.2M with Replacement Cost Coverage./ Liability Coverage of $1M I Fidelity Bond Coverage of $50,000 Result./ Individual H0-6 Policy coverage is acceptable at $90,000 as we rely on the agent to determine acceptable coverage and the policy clearly indicates 'Walls In" coverage included./ Building Coverage is acceptable since it includes Replacement Cost coverage./ Liability Coverage is acceptable since it meets the $1M requirement./ Fidelity Bond Coverage is acceptable - 41 units x $375 HOA Dues X 3 months = $46,125 19

20 Example #4 Attached Condo Based on the followlns loan parameters: Conventional Loan Attached Loan Amount $265,200 Individual Policy Coverage of $22,500 Master Policy., Building Coverage of $2,005,400 with replacement cost coverage., Liability Coverage of $2M., Fidelity Bond Coverage of $500,000., Walls In coverage included Result., Individual Policy not required since master policy includes H0-6 coverage., Building Coverage is acceptable since it includes Replacement Cost coverage., Liability Coverage is acceptable since it meets the $1M requirement., Fidelity Bond Coverage - Not required, only 8 units in project 20

21 Flood Insurance Coverage Flood Insurance./ Flood Insurance is required to protect the property against loss caused by flooding. Flood Insurance must be purchased on any improved real estate that is located in an area that has been identified by FEMA as a Special Flood Hazard area The amount of the insurance must at least equal the lesser of:./ 100% of the Cost Estimate./ The maximum amount allowable by FEMA $250,000./ The loan amount Maximum Deductible allowed./ 1-4 Units - $5,000./ PUD - $25,000 allowed on Master Policy./Condo - $25,000 allowed on Master Policy Note: An application is acceptable for a new policy provided the policy is paid in full or the premium is collected at closing 21

22 Policy Period Purchase./ The annual policy must be in effect at time of funding and must have a minimum of 10 months remaining at time of funding Refinance./ The annual policy must have a minimum of 60 days remaining at time of funding./ If less than 60 days remaining, a copy of the renewal policy is required./ Exceptions will be considered on a case by case basis if the agent will not provide a renewal policy prior to closing Master Policy./ The policy must be in effect a minimum of 14 days at time of funding 22

23 Date/Time Calculator The date and time calculator can be used as a tool to assist with determining when a file must fund to meet timeline requirements Access Click on the Date Calculator (add/subtract) Ca lculators Apps & API Free Fun Date to Date Calculator (duration) Business Date to Date (exclude holidays) Date Calculator (add I subtract) Business Date exdude holida s 23

24 Date/Time Calculator Complete the Date Calculator screen: ~ Add the insurance expiration date in the first date field ~ Click on subtract ~ Add the number of days required to be remaining at time of funding ~ 60 days on a refinance ~ Click on Calculate a new date Date calculator: Add to or subtract from a date This service enables you to add or subtract days, months and years to a date to calculate a past or future date. Design changes: What is new and why? Start Date Add/subtract: Years: Months: Weeks: Days: KJ-> Subtra~ l :]L I------'11 II I r=@------, Include a time.,. Include only certain weekdays.,. 24

25 Date/Time Calculator Based on the input, loan must fund by Friday, October 15, 2015 to meet the 60 day requirement on a refinance transaction From Tuesday, December 15, 2015 Subtracted 60 days <Besult: Friday, October 16, 201 $) 25

26 Helpful Hints Insured Names & Property Address./ Individual policies must reference all individuals on title./ Master policy must reference the Homeowners Association./ All policies must reference the subject property address, unit number, if applicable and loan number./ The legal address of the property must match the appraisal./if an AKA is used due to mailing address, zip code must match or AKA can't be used Proof of Payment./ A paid receipt or letter from the insurance agent is required to the end of the policy term on all policies./ If a renewal policy is required, the policy must be paid in full or collected on the H UD at closing 26

27 Helpful Hints (continued) HomeBridge Mortgagee Clause The Lender must be named as the Payee in the event of loss on the policy The Loss Payee clause must read: HomeBridge Financial Services, Inc ISAOA/ATIMA 194 Wood Avenue South, gth Floor lseli n, NJ Miscellaneous Handwritten changes on the declaration page are not acceptable Changes made on an agent's letterhead and signed by the agent are acceptable The policy must be for a full year Windstorm coverage is not required Rent Loss insurance is not required Property and liability coverage must be on the appropriate form (i.e. property coverage on a property policy and liability on a liability policy) 27

28 Questions? 28