HO-6 Insurance Requirements for Condominium and PUD Properties 



Here is an excerpt from a memo sent to us by one of our biggest lenders: 

Borrowers must show evidence of hazard insurance coverage for all condominium projects with attached units, including two- to four- unit projects, that covers fixtures, equipment, and other personal property inside individual units if they will be financed by the mortgage.  Borrowers must show evidence of a “walls-in” coverage policy (commonly known as HO-6 policy) unless they can document that the master policy provides the same interior unit coverage. The master policy must include replacement of improvements and betterment coverage to cover any improvements that the borrower may have made to the unit.  The HO-6 insurance policy must provide coverage in an amount that is no less than 20% of the condominium unit’s appraised value.  These requirements apply to all loans, Conventional and Government.


Since this will increase the cost of ownership, this will further drive down the value and consumer demand of Condos and PUDs.  I know lenders are doing this to protect their future investments but by enacting a regulation like this at a time when they have massive condo REO inventory on their books how much are they decreasing the value of their own assets by?


Contact me if you have questions about what this means. 



Posted by Ben Nicolas on
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