Casualty Losses

In most cases, you as the servicer, act on Fannie Mae’s behalf to assess any damage related to a casualty loss, consult with the borrower to ensure that the damage is addressed appropriately, and generally protect our interests.

The table below lists key points to consider in processing a casualty loss.

Guide Reference

Multifamily Selling and Servicing Guide
 Part V: Servicing and Asset Management, Chapter 4, Section 416

Delegation Criteria

Generally, you have delegated authority to act on Fannie Mae’s behalf if the property meets the four conditions listed in the Multifamily Guide and summarized here.

  • The mortgage loan is performing and no other default events have occurred.
  • The combination of insurance proceeds and borrower funds is sufficient to restore the property and satisfy any permitting requirements.
    • The property, when restored, would generate sufficient income to cover operating expenses, required replacement reserve deposits, payments on the mortgage loan, any subordinated debt, and meet the required restoration debt-service coverage ratio (DSCR) as specified in the loan documents, if applicable
  • The repair and restoration work will be completed within a reasonable time.

For non-performing mortgage loans, contact Fannie Mae’s Special Asset Management (SAM) group immediately.


Here at a high-level is the process you follow in assessing a casualty loss and overseeing its resolution. For a more precise description of your role and responsibilities, see the Multifamily Guide and the instructions accompanying the forms referenced below.

  1. Assess the casualty loss and document your findings in your servicing file.
  2. Notify Fannie Mae using Report of Multifamily Hazard Insurance Loss (Form 178).
  3. Perform a Multifamily Catastrophic Loss Inspection (Form 4261), if required.
  4. Ensure that the borrower files a timely proof of loss with its insurance carrier.
  5. Work independently with the insurance carrier to adjust the loss claim if the borrower fails to take the necessary steps in a timely manner.
  6. Endorse insurance loss drafts or checks on Fannie Mae’s behalf.
  7. Refer to the loan documents and the Fannie Mae Multifamily Guide for the appropriate application of insurance proceeds.
  8. Authorize the borrower to begin repair or restoration work after all required funding, documentation, permits, etc., are in place. (Of course, emergency work to protect the property or the health and safety of residents should be done immediately.)
  9. Disburse funds at appropriate points in the restoration process.
  10. Ensure that the borrower is diligent in pursuing repairs.


Depending on the circumstances, you may need some or all of the following forms, all available on

  • Multifamily Hazard Insurance Loss (Form 178) – submitted to Fannie Mae within 30 days of a casualty (10 days in cases involving serious injury or death).
  • Fannie Mae Catastrophic Loss Inspection (Form 4261) – submitted to Fannie Mae when losses exceed the lesser of $500,000 or 20 percent of the unpaid principal balance (UPB) of the mortgage loan.
  • Insurance Loss Payee Notice Letter (Form 4803) – sent to insurer if a loss draft or check has been made payable to the servicer; notifies insurer that future loss drafts or checks must be payable to Fannie Mae in care of the servicer.
  • Letter of Authorization for Multifamily Collateral Agreement Custodial Account (Form 2051) – executed by servicer and depository institution and submitted to Fannie Mae; establishes an account to hold funds related to collateral agreements, such as completion/repair reserves.
  • Insurance Loss Proceeds Collateral Agreement (Form 4541 or Form 6409 for loans originated on or after June 1, 2011) –  executed by borrower and servicer and submitted to Fannie Mae; specifies terms and conditions under which funds held in the custodial account will be released to the borrower.

How to Submit

[email protected].

Structured Facilities*
(Credit Facilities and Bulk Deliveries): [email protected]

Seniors Housing*: [email protected]

Hard Copy (if required by Fannie Mae)
Fannie Mae
Credit Services/Drawer AM
Mailstop 8H-607
3900 Wisconsin Ave. NW
Washington, DC 20016


Not applicable

Use of Funds

When you receive insurance proceeds, you may

  • Reimburse the borrower for the cost of repairing the damage to the property and restoring it to habitable condition.
  • Deposit the funds in a collateral agreement custodial account to be disbursed according to the terms of the executed Insurance Loss Proceeds Collateral Agreement (Form 4541 or Form 6409 for loans originated on or after June 1, 2011).
  • Recommend to Fannie Mae that the proceeds be applied to the UPB of the mortgage loan.

Always consult the loan documents, transaction documents, your servicing agreement, the Multifamily Guide and the relevant forms for complete instructions.

© 2011 Fannie Mae. Trademarks of Fannie Mae.