HUD Archives: News Releases
October 22, 2002
MARTINEZ ANNOUNCES HUD WILL NOT REQUIRE TERRORISM INSURANCE ON
FHA-INSURED MULTIFAMILY LOANS
Policy Will Reduce Costs For Existing FHA-Insured Multifamily Properties
and Encourage Construction of New Properties
CHICAGO - Reassuring the housing industry that HUD will not follow the
lead of many private insurance companies, Housing and Urban Development Secretary
Mel Martinez announced today that the Federal Housing Administration (FHA) will
not require insurance coverage against acts of terrorism as a condition of its
multifamily mortgage insurance.
"Our policy will result in reduced costs for existing and future FHA-insured
multifamily properties, and will continue to encourage the construction of new
projects," Martinez told the annual convention of the Mortgage Bankers
Association of America (MBAA).
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 which was not required prior to September 11, 2002, could cost
a typical 100-unit project owner an additional $5,000 annually, presenting financial
constraints for existing properties, and even discouraging 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.
In response, Martinez announced today 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.
In FY 2001, FHA committed $1.5 billion toward ensuring multifamily programs
for construction and rehabilitation. In 2002, FHA upped its commitment to $2.8
HUD is the nation's housing agency committed to increasing homeownership,
particularly among minorities, creating affordable housing opportunities for
low-income Americans, supporting the homeless, elderly, people with disabilities
and people living with AIDS. The Department also promotes economic and community
development as well as enforces the nation's fair housing laws. More information
about HUD and its programs is available on the Internet.
Content Archived: April 9, 2010