Is my condo Fannie Mae warrantable for insurance?

There is no single warrantability endorsement to buy. Insurance warrantability is a pass or fail set of conditions a project has to meet for a conventional loan on a unit to be deliverable to Fannie Mae, and the Selling Guide splits those conditions across three different sections. A board that reviews its coverage one policy at a time will routinely miss a warrantability failure, because every individual policy can be in force while the bundle as a whole fails.

The three sections are worth committing to memory, because using the wrong one is the most common way a review goes sideways. Property, replacement cost, coinsurance, ordinance or law, and flood all live in section B7-3, Property and Flood Insurance. Commercial general liability lives on its own in section B7-4-01, Liability Insurance. Fidelity or crime coverage lives in a third section, B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments. Check each item against its own section, not against a generic summary.

Under B7-3, the master policy has to insure the buildings and common elements at 100 percent of replacement cost. A policy written on actual cash value, which deducts depreciation, fails this test, and an older building can be dramatically underinsured on an ACV basis. The policy also has to avoid a coinsurance penalty, which in practice means carrying an agreed value or replacement cost provision, and it should carry ordinance or law coverage where local building codes would drive up the cost of a code-compliant rebuild.

Flood is the binary item inside B7-3. If any project building sits in a FEMA-designated Special Flood Hazard Area, the master program has to carry flood insurance equal to the lesser of the National Flood Insurance Program maximum or the building replacement cost. Because FEMA revises flood maps over time, a building can move into the high-risk zone between renewals with no flood policy behind it, so confirm each building against the current map rather than the map from the last review.

General liability sits in its own section, B7-4-01, and this is the one most often cited against the wrong reference, so it is worth stating plainly: liability is B7-4-01, not B7-3. The requirement is a commercial general liability policy covering the common elements, written at not less than 1,000,000 dollars per occurrence.

The 1,000,000 dollar per-occurrence figure is a true regulatory floor, not a market range, which is why it is stated as a hard number rather than a band. In practice the dedicated community-association markets write primary general liability at the 1,000,000 dollar to 2,000,000 dollar level and layer an umbrella above it, but only the per-occurrence floor is what the Selling Guide tests for warrantability. A limit left below that floor, which happens when a legacy policy never got raised as the community grew, breaks the liability leg of the bundle even when the property and fidelity legs are clean.

Fidelity or crime coverage is the third leg, in section B7-4-02, and it applies to projects of more than 20 units. For those projects, the bond has to be sized to at least three months of aggregate assessments on all units plus the association reserve funds, and it has to extend to any management agent that handles association money.

Two failure patterns dominate here. The first is a bond frozen at a flat number the prior agent picked years ago, which quietly falls below the three-months-plus-reserves floor as reserves grow. The second is a missing management-agent extension: the association carries a correctly sized bond for its own board and staff, but the management company that actually has custody of the operating and reserve accounts is not named. Under the current B7-4-02 rule, the association has to carry its own policy covering the agent, and relying on the management company's separate corporate policy does not satisfy the requirement. Recompute the required figure at each renewal against the current reserve balance and confirm the agent is named.

Pull the current master policy declarations and the certificate of insurance, then walk the three sections in order. Confirm the property valuation reads replacement cost at 100 percent, not actual cash value, and that an agreed value or replacement cost provision is present to defeat coinsurance. Confirm flood coverage against the current FEMA map for every building. Confirm the general liability per-occurrence limit is at least 1,000,000 dollars. Confirm the fidelity bond math against three months of current assessments plus current reserves, and confirm the management agent is named on it.

The reason to run this before a sale is under contract rather than after is timing. A warrantability failure almost never surfaces at renewal; it surfaces when a buyer's lender pulls the master policy during a unit sale and the deal stalls, and the board usually hears about it from an angry seller rather than from the carrier. The dedicated community-association markets write to Fannie warrantability as a matter of course and will issue evidence of insurance that maps to the Selling Guide items, which is what a reviewing lender wants to see; the recurring gaps cluster on accounts placed in a generalist habitational program instead.