What does a mortgage lender need from the homeowners insurance agent before closing?

A binder, declarations page, or certificate of property insurance signed by the insurer, with the lender named as mortgagee under a standard mortgagee clause, dwelling coverage on a replacement-cost basis, and an effective date on or before closing. Fannie Mae Selling Guide B7-3-07 (08/05/2026) is the conventional rule.

This is for the processor or processing manager at an independent mortgage bank on Encompass whose HOI row is still open prior to docs. The counterparty is the insurance agency. Pull the conditions list, the loan number, the lender’s legal name, and the property address before you email the agent.

What to put in the packet

The underwriter clears HOI from evidence of a valid policy, not from a quote. Fannie Mae Selling Guide B7-3-07 (08/05/2026) says verify a valid policy. A certificate is acceptable if it has the information the lender needs and is signed by the insurer. If the lender cannot tell whether the policy meets the Guide, the loan is not eligible for Fannie Mae purchase.

Item	Why it is on the packet
Binder, declarations page, or certificate of property insurance signed by the insurer	B7-3-07. An agent-only signature on a certificate is the usual bounce
Standard or union mortgagee clause, without contribution	B7-3-08 (12/14/2022). A loss payable clause is not acceptable
Lender or servicer legal name, then “its successors and/or assigns” (ISAOA), mailing address	B7-3-08
Loan number	Shop overlay so the endorsement hits the right file
Named insured: every person who holds title	B7-3-08
Dwelling coverage on a replacement-cost basis (roofs may be actual cash value)	B7-3-02 (08/05/2026)
Deductible at or under 5% of the coverage amount, including any separate peril deductible	B7-3-02
Effective date on or before closing	The policy has to exist when the loan funds
Invoice or paid receipt, when the first-year premium is collected at closing	Shop overlay. B7-3-07 requires it on a second mortgage
Written confirmation the policy settles on a replacement-cost basis, if the dec page is silent	Overlay. This is not an RCE
Condo: current master policy or certificate covering the unit, plus HO-6 when required	B7-3-07, B7-3-03, B7-3-04

If the policy renews within about two months of closing, many shops ask for the next term. That window is a shop overlay, not a Fannie rule. B7-3-01 (12/14/2022) lets the borrower select the insurer if the policy meets the Guide.

The mortgagee clause is the usual bounce

B7-3-08 requires a “standard” or “union” mortgagee clause without contribution on a one- to four-unit policy. A loss payable clause is not acceptable. Name the lender, then “its successors and/or assigns,” then the mailing address. If the lender is not the servicer, name the servicer that way. Do not name Fannie Mae unless coverage would be impaired without it, and then only as “Fannie Mae, in care of” the servicer.

MERS must not be named as mortgagee or loss payee, even when MERS is the mortgagee of record. Freddie Mac Guide 4703.6 (read 2026-10-09) is the same on MERS and names “(Seller/Servicer), its successors and assigns,” not Freddie Mac. ATIMA on the line is overlay. The Guide language is ISAOA. A refinance still needs this lender’s clause. A prior servicer in the mortgagee field is a bounce.

Coverage is replacement-cost settlement, not a dollar formula

B7-3-02 (08/05/2026) treats a one- to four-unit policy as sufficient when it settles on a replacement-cost basis, except roofs. Roofs must be insured; they do not have to be replacement cost. Actual cash value is acceptable for personal property and structures that are not buildings. The maximum deductible is 5% of the coverage amount, and each separate peril deductible has to stay inside that 5%.

The Guide no longer uses unpaid principal balance versus 80% of replacement cost on a one- to four-unit file, and it no longer requires an estimator. Many desks still match dwelling coverage to the loan amount. That match is a shop overlay. Read the settlement language on the dec page before you chase a dollar figure.

The agent is often right to refuse an RCE

A replacement-cost estimate is the carrier’s underwriting worksheet. It is not a Fannie 1-4 origination form after the 08/05/2026 Guide. Shops still ask for it when the dec page is silent. That is overlay.

Florida Statute 626.9551(1)(e) (read 2026-10-09) says no person may require the agent’s replacement cost estimator as a loan condition, and the agent may not provide it. North Carolina G.S. 58-3-137 (read 2026-10-09) bars requiring it. Other states differ. Check counsel. This is not legal advice.

The Independent Insurance Agents of North Carolina (RCE guidance, updated 2025-09-17) tells members that writing “insured to 100% of replacement cost” is a guarantee of adequacy, and an E&O problem. What they will send is that the policy provides replacement-cost coverage up to the limit on the declarations page.

On r/loanoriginators in February 2026, a conventional file sat because the agent would not send an RCE. Florida processors pointed at the statute. Another processor said an email confirming replacement-cost settlement cleared the overlay. Ask for that email. Do not hold the lock on a worksheet the agent is told not to send.

A condo file needs two packets

B7-3-07 requires the current master policy, or a certificate showing the unit is covered. Shops often get that on an ACORD 28. B7-3-03 (08/05/2026) wants master coverage at least equal to 100% of the estimated replacement cost of the project improvements, including common elements and residential structures. Document that with guaranteed or extended replacement cost, an insurer replacement-cost estimate, the project’s insurance risk appraisal, or a statement from the insurer or another qualified professional. Master loss settlement is replacement cost, except roofs. A per-unit deductible on the master may not exceed $50,000.

B7-3-04 (08/05/2026) requires a unit owners (HO-6) policy when any interior is off the master, or when the master has a per-unit deductible. The HO-6 amount is the greater of the uncovered interior or that deductible. It must settle on a replacement-cost basis. The HO-6 deductible may not exceed the greater of 5% of that coverage or $2,500. Put the standard mortgagee clause on the HO-6. The master names the HOA.

HUD Handbook 4000.1 (read 2026-10-09) puts Evidence of Hazard Insurance in the FHA case binder. On an FHA condo, the master has to equal at least 100% of the insurable replacement cost of the project, including the units, and a walls-in HO-6 if the master leaves the interior off.

What to leave off

Item	Why it delays or fails
Quote or proposal	Not a policy
Certificate signed only by the agent	B7-3-07: signed by the insurer
MERS as mortgagee or loss payee	B7-3-08 and Freddie 4703.6
Fannie Mae or Freddie Mac named as mortgagee	Name the lender or servicer
Loss-payee clause instead of a mortgagee clause	B7-3-08
Effective date after closing	The file cannot fund
Prior lender on a refinance	This lender’s clause
Full Social Security number	Last-four if a portal asks
Agent’s internal RCE in Florida or North Carolina	Fla. Stat. 626.9551(1)(e); N.C. G.S. 58-3-137
Agent letter guaranteeing 100% replacement cost	IIANC: E&O red flag

Fannie, Freddie, and FHA are not the same packet

Agency	Evidence	Coverage on a 1-4	Mortgagee
Fannie Mae	Valid policy or insurer-signed certificate (B7-3-07, 08/05/2026)	Replacement-cost settlement except roofs; deductible at or under 5% (B7-3-02)	Standard or union, no contribution; ISAOA; no MERS (B7-3-08)
Freddie Mac	Same shape in 4703.2, updated by Bulletin 2026-C (03/18/2026)	Replacement-cost basis excluding roofs; deductible at or under 5% of dwelling	Standard mortgage clause; at least 10 days’ cancel notice; Seller/Servicer named, not Freddie; no MERS (4703.6)
FHA	Evidence of Hazard Insurance in the case binder (HUD Handbook 4000.1)	Condo master at 100% of insurable replacement cost, plus HO-6 if the master is not walls-in	Mortgagee’s overlay. 4000.1 does not publish a UPB formula for a 1-4 origination file

Freddie retired the old unpaid-principal-balance versus 80% of replacement-cost calculation in Bulletin 2026-C. Do not chase that formula from an old AllRegs printout.

Pull the files that still have an open HOI condition. Check each packet against the conditions list: evidence of a valid policy, the lender named as mortgagee with ISAOA, replacement-cost settlement on the dwelling, an effective date on or before closing, and, on a condo, the master plus the HO-6. Resend the same ask for any missing item, and log the sent date on the file that afternoon.