Does FHA require a borrower to obtain hazard insurance?

Mortgagees may require the Borrower to have hazard insurance.  If the Mortgagee requires the Borrower to purchase hazard insurance, the Mortgagee must:

  • be named as a “Loss Payee” on the hazard insurance policy; and
  • escrow sufficient funds for the payment of renewal premium.

When the Mortgagee has required the Borrower to purchase hazard insurance, the Mortgagee must pay renewal premiums through one of the following methods:

  • remit the renewal premium when it is due; or
  • advance escrow funds until there are sufficient funds for the payment of the renewal premium, if the Borrower is required to pay the premiums and fails to do so.

The Mortgagee must not insist on more coverage than is necessary to protect its investment. The Mortgagee must escrow renewal premiums for the entire amount if the Borrower chooses to insure the Property for more than the minimum amount.

For FHA policy information see Handbook 4000.1 III.A.1.h.i. at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04386