Terrorism coverage need not apply
|October 23, 2002|
HUD says it will not require terror insurance on FHA-insured multifamily loans
Inman News Features
The Federal Housing Administration will not require insurance coverage against acts of terrorism as a condition of its multifamily mortgage insurance, said U.S. Department of Housing and Urban Development Secretary Mel Martinez today in Chicago at the Mortgage Bankers Association of America's annual convention.
Martinez said the policy will result in reduced costs for FHA-insured multifamily properties and boost the construction of new projects.
Following the terrorist attacks of Sept. 11, 2001, primary insurance companies began excluding or limiting coverage for acts of terrorism in catastrophic loss insurance policies, including policies that cover multifamily properties. Where such coverage is available, costs are exorbitant, terms are restrictive and coverage limits are low.
This insurance could cost a typical 100-unit project owner an additional $5,000 annually, presenting the possibility of financial constraints for existing properties and limiting the construction of new properties.
In the months following Sept. 11, the MBAA, among other industry organizations, asked HUD to clarify its position on terrorism insurance. Martinez responded to the request today with the news that in the event of an act of terrorism that destroys or partially destroys an FHA-insured multifamily property, HUD would pay the partial or full claim to the lender.
Copyright: Inman News Service