Required for FHA Financing—
Effective April 29, 2011
The one-year waiver of the HO-6 requirement expires April 28, 2011. Any condominium unit mortgage (with FHA financing) closed on or after April 29, 2011 must:
- Evidence that the master policy includes interior unit coverage, including replacement of interior improvements and betterment coverage to insure improvements that the borrower may have made to the unit
OR
- Borrower must obtain a "walls-in" coverage policy (HO-6 policy).
Some lenders allowed the waiver of coverage requirement and some didn’t. If you’ve been working with lenders that haven’t required HO-6 coverage for FHA financing on FHA approved condos then here’s your “heads up”. FHA waived this new requirement for the last year to allow lenders to implement systems and software that could manage the disclosure, collection and tracking of this coverage.
Many condominium project master policies don’t cover individual unit interior repairs. That’s where HO-6 coverage comes in and fills the gap to provide full restoration of the dwelling unit in case of fire, water damage, etc.
Prepare your FHA condo buyers for this expense, which will be part of their qualifying ratios and refer them to your insurance agent partners who can help them determine what the project’s master policy covers and if HO-6 coverage is needed.
As Always…Call if I Can Be of Further Assistance!
