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Announcement 21-0024: Revised CMS Hazard Insurance Policy

June 15, 2021


The Carrington Mortgage Services, LLC (CMS) Hazard Insurance Policy has been revised to update the insurance coverage requirements for FHA Loans, Condominium and PUD Projects, and Force Placed Coverage as described below.

FHA Loans

For FHA Loans, properties located within an SFHA, Flood Insurance must be maintained for the life of the Mortgage in an amount at least equal to the lesser of:

  • The outstanding balance of the new Mortgage (Note Loan Amount), less estimated land costs (Site Value); or
  • The maximum amount of the NFIP insurance available with respect to the property improvements; or
  • “Guaranteed Replacement Cost”

Condominium and PUD Project Insurance Requirements

Minimum Hazard Insurance Coverage

Insurance should cover 100% of the insurable replacement cost of the project improvements and common elements, including the individual units in the project.

If the subject property is an attached PUD or a condominium, the respective associations may acquire a blanket policy to cover the project. The entire project insurance policy should be reviewed to ensure the homeowners’ association maintains a master or blanket type of insurance policy, with premiums being paid as a common expense. The policy must show the HOA as the named insured.

For PUD projects, individual insurance policies are also required for each unit. If the project’s legal documents allow for blanket insurance policies to cover both the individual units and the common elements, blanket policies are acceptable in satisfaction of its insurance requirements for the units.

The policy must require the insurer to notify in writing the HOA (or insurance trustee) and each first mortgage loan holder named in the mortgagee clause at least 10 days before it cancels or substantially changes a condo project’s coverage.

HO-6 Insurance Coverage for Condominiums

If the unit interior improvements are not included under the terms of the condominium policy, the borrower is required to have an HO-6 hazard policy (“wall-in coverage”), which is sufficient to repair the condo unit to its condition prior to a loss claim event.

The HO-6 coverage must be for an amount that is at least 20% of the appraised value of the individual unit. The Master Policy must also contain Fidelity Bond or Directors and Officers Liability coverage where required in the underwriting guidelines.


Force Placed Coverage (Restriction)

An existing insurance policy with force placed coverage is not permitted. The force placement of coverage is designed for use at any time during the term of a loan in uninsured and underinsured situations, it is not intended for use at loan origination. The consumer must have their own voluntary policy when originating a loan.


Refer to the Hazard Insurance Policy and CMS Sellers Guide for additional details.


Please contact with any questions.

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