What insurance does Freddie Mac require for multifamily loans?

Freddie Mac's Multifamily Seller/Servicer Guide (Chapter 43) requires borrowers to maintain property insurance on a replacement cost basis with coverage equal to 100% of the insurable replacement cost of improvements. The policy must include an agreed amount endorsement or a coinsurance clause of no less than 90%. Insurers must hold an A.M. Best rating of A- or better with a Financial Size Category of VI or higher.

General liability insurance must carry limits of at least $1,000,000 per occurrence. Flood insurance is mandatory for any property with improvements located in a FEMA-designated Special Flood Hazard Area, and coverage must equal at least the lesser of the outstanding principal balance or the maximum available under the NFIP, supplemented by private excess flood if the NFIP maximum is insufficient. Business income or loss of rents coverage must provide at least 12 months of projected gross income.

For properties in Tier 1 wind zones (coastal counties in hurricane-prone states), Freddie Mac caps the named-storm deductible at 5% of the total insured value and requires that the borrower demonstrate liquid reserves sufficient to cover the deductible. Equipment breakdown coverage is required, and ordinance or law coverage must be carried at a minimum of 10% of the building value. The Seller/Servicer Guide is updated periodically, so borrowers should confirm current requirements with their Optigo lender at each renewal cycle.