What is the condo HO-6 walls-in coverage requirement for a mortgage?

An HO-6 is required on a conventional condo file when the master leaves any interior of the unit or unit improvements off, or when the master carries a per-unit deductible. Fannie Mae Selling Guide B7-3-04 (08/05/2026) sets that coverage at the greater of the uncovered interior or that deductible, on a replacement-cost basis.

This is for the processor or processing manager at an independent mortgage bank on Encompass whose HOI row is still open prior to docs because the unit policy is missing, thin, or contents-only. The counterparties are the unit insurance agency and, for the master, the HOA or its carrier. Pull the conditions list, the master certificate already on the file, the unit binder or declarations page, the loan number, and the unit address before you email either desk.

Walls-in names two different documents

Desks say “walls-in.” They mean two jobs.

HUD Handbook 4000.1 (read 2026-10-10) defines Walls-In Insurance as coverage of the interior of the unit and personal property inside it, and uses HO-6 as the name of that unit policy. Insurance shops use walls-in, bare walls, and all-in for how far the master reaches into the unit. Fannie Mae B7-3-04 (08/05/2026) never uses the phrase. It asks whether any interior of the unit, or improvements to the unit, sits off the master.

What the file calls it	What the master covers	What B7-3-04 still wants
Bare walls, or studs-out	Structure and common elements, to unfinished surfaces	An HO-6 for the interior, replacement cost
Walls-in, original-condition interior	Original finishes as built	HO-6 for betterments left off, and for any per-unit deductible
All-in	Original interiors, sometimes betterments	An HO-6 if the master has a per-unit deductible

On r/HOA in April 2024, a buyer treated the HO-6 as contents coverage because the master “covered the exterior.” A contents-only HO-6 (Coverage C, no Coverage A) is not walls-in for the lender.

Florida Statute 718.111(11)(f) (2025 Florida Statutes, read 2026-10-10) forces the master to exclude floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, built-in cabinets and countertops, and window treatments inside the unit. Those items are the unit owner’s to insure. Other states differ. Check counsel. This is not legal advice.

Fannie requires the HO-6 in two cases

B7-3-04 requires a unit owners policy when any interior of the unit or improvements to the unit is off the master, or when the master includes a per-unit deductible. A walls-in master does not waive the second trigger. B7-3-03 (08/05/2026) caps that per-unit deductible at $50,000. Lender Letter LL-2026-03 (03/18/2026) is the same two-case test.

The unit policy should be Special form or equivalent. If the master’s per-unit deductible applies to a required peril, the HO-6 has to cover that peril.

B7-3-07 (08/05/2026) wants a copy of the current master, or a certificate showing the unit is covered. Shops usually get that on an ACORD 28. The HO-6 is a separate binder or declarations page. What a mortgage lender needs from the homeowners insurance agent before closing is the rest of the packet. This page is the unit-policy row.

The amount is the greater of two figures

The minimum HO-6 amount must equal at least the greater of an amount sufficient to cover any interior or improvements not on the master, enough to restore the unit to its condition prior to a loss, or the per-unit deductible if the master has one. Sufficiency is based on the best information known to the lender, from the borrower, the agent, or the HOA documents.

The HO-6 must settle on a replacement-cost basis. There is no roof actual-cash-value carve-out on the unit policy. That carve-out lives on the 1-4 policy and the master. The maximum HO-6 deductible is the greater of 5 percent of that coverage amount, or $2,500.

What you read	Conventional test
Interior off the master	HO-6 Coverage A enough to restore that interior
Master per-unit deductible	HO-6 Coverage A at least that deductible
Both	The greater of the two
Loss settlement on the HO-6	Replacement-cost basis
HO-6 deductible	Greater of 5% of that coverage or $2,500
Master per-unit deductible cap	$50,000 (B7-3-03)

Freddie Mac Guide 4703.2 (effective 09/16/2026, read 2026-10-10) is the same two cases, the same greater-of amount, replacement-cost settlement, and a deductible no more than the greater of 5 percent of the limit or $2,500.

Do not bounce the unit agent for a dwelling worksheet. How much homeowners insurance coverage Fannie Mae requires is the 1-4 coverage test. The unit amount is this greater-of math, not unpaid principal balance.

Twenty percent of appraised value is overlay

Many condition lists still print 20 percent of the appraised value as the HO-6 floor. B7-3-04 does not use that percentage. That match is overlay. Take it to the underwriter with B7-3-04 and the master certificate. If the shop keeps the overlay, the named insured has to buy the higher Coverage A.

USDA HB-1-3555 paragraph 12.11 (read 2026-10-10) wants a Walls-In (HO-6) policy if the master does not include interior unit coverage. It does not publish a 20 percent formula. Correspondent overlays print 20 percent.

The HO-6 cannot cure a short master

B7-3-03 still wants the master at least equal to 100 percent of the estimated replacement cost of the project improvements, including common elements and residential structures. Master loss settlement is replacement cost, except roofs. A per-occurrence deductible may not exceed 5 percent of the master coverage amount.

The HO-6 covers the per-unit deductible. It does not cure a master per-occurrence deductible over 5 percent, and it does not fill a master short of 100 percent replacement cost. On r/loanoriginators in March 2026, a condo desk wrote that an HO-6 cannot be used toward a master over the 5 percent cap. Chase the HOA or the master carrier.

B7-3-08 (12/14/2022) puts the standard or union mortgagee clause on the unit policy. A mortgagee clause naming the lender is not required on the master. The master names the HOA. What is required in a mortgagee clause is that line.

Florida Statute 627.714 (read 2026-10-10) requires at least $2,000 of property loss-assessment coverage on a unit owner’s residential policy. That is a state insurance rule, not Fannie’s Coverage A test.

Fannie, Freddie, FHA, and USDA are not the same HO-6 test

Agency	When the unit policy is required	Amount	Settlement
Fannie Mae	Interior or improvements off the master, or a per-unit deductible (B7-3-04, 08/05/2026)	Greater of the uncovered interior or that deductible	Replacement cost. Deductible at or under the greater of 5% or $2,500
Freddie Mac	Same two cases (4703.2)	Greater of repair-to-prior-condition or the per-unit deductible	Replacement cost. Deductible at or under the greater of 5% of the limit or $2,500
FHA	Master does not include interior unit coverage, including improvements and betterments (Handbook 4000.1, Walls-In (HO-6), read 2026-10-10)	4000.1 does not publish Fannie’s greater-of formula	Overlay. Document the Walls-In policy on HUD-9991
USDA	Master does not include interior unit coverage (HB-1-3555 12.11)	Handbook does not publish a 20% of appraised value formula	Walls-In (HO-6) for the interior and personal property inside the unit

VA’s lenders handbook does not publish Fannie’s HO-6 amount formula. Shops still send the unit policy when the master leaves interior off.

What to bounce, and what to leave off

Item	Why it delays or fails
No HO-6 when interior is off the master, or the master has a per-unit deductible	B7-3-04
Contents-only HO-6 (Coverage C, no Coverage A)	Not walls-in for the lender
Actual cash value on the HO-6 dwelling	B7-3-04 wants replacement-cost settlement
HO-6 deductible over the greater of 5% or $2,500	B7-3-04
Using the HO-6 to paper a master below 100% replacement cost	B7-3-03
Using the HO-6 to paper a master per-occurrence deductible over 5%	B7-3-03. The HO-6 covers the per-unit deductible only
Unit lender added to the master	B7-3-08. Put the clause on the HO-6
Chasing 20% of appraised value on a conventional file	Overlay. B7-3-04 does not use that percentage

Pull the condo files that still have an open HOI or HO-6 condition. Read the master certificate for interior coverage and the per-unit deductible, then read Coverage A and the settlement language on the unit binder in the eFolder. If the master leaves interior off, or shows a per-unit deductible, and the HO-6 is missing, contents-only, or below that deductible, resend the same ask to the unit agency that afternoon and log the sent date on the file.