Securing funding is often crucial for multifamily housing agencies looking to renovate or expand their properties. Public and affordable housing providers, often working with limited budgets, typically rely on external sources like investors and lenders, who have their own insurance requirements. Understanding these lender requirements is essential to avoid unexpected costs and ensure a smooth path to funding.
Renovating or updating housing stock can be a significant financial commitment. Many housing agencies turn to external funding to manage these costs. However, lenders can require extensive coverage, which may be difficult to find or unavailable. This can create obstacles for agencies, notes Jennifer Humphrey, senior account executive at HAI Group®.
“Lender requirements sometimes present a cumulative challenge,” she said.
Lending requirements for multifamily residential development projects depend on the project and lender. Required coverages often include:
It is crucial to contact your carrier or insurance professional as early as possible. By discussing lender requirements with your insurance team at the outset, you’re better positioned to adjust your policy and avoid delays. According to Humphrey, contacting your carrier or insurance professional too late in the process can lead to project delays or unmet requirements, as quotes can take several weeks to secure depending on the coverage.
“As soon as you have an idea for a project you want to pursue, even if you don’t know whether it requires lender support, that’s when you should call your insurance provider,” Humphrey said.
Lenders often require specific insurance coverage as part of the loan approval process that may not align with the needs of your property. Brent Arbour, another senior account executive at HAI Group, has seen scenarios where lenders require auto coverage even when a project doesn’t involve driving.
Arbour emphasized the importance of having your insurance professional review lender requirements early, allowing for back-and-forth with the lender. HAI Group’s account executives strive to ensure lender requirements are tailored to the project’s needs.
This proactive approach can save you both time and money. By having your insurance professional review the terms and conditions before the contract is finalized, you may be able to negotiate with the lender. For example, if a certain line of coverage is required for the project but your insurance professional only receives declinations, you can bring those declinations to the lender and request some leeway in coverage requirements, Arbour explained.
Talking to your carrier before signing a contract helps streamline the insurance process, reducing potential delays or errors. Early engagement enables your insurance team to anticipate long-term obligations and ensure compliance with loan requirements. Starting early also helps you avoid last-minute roadblocks when securing coverage and presenting documentation to your lender.
“Insurance premiums can impact your loan’s affordability,” Humphrey said. “By consulting with your insurance professional before finalizing the contract, you can get a clear estimate of your insurance costs, enabling you to assess whether you can meet lender qualifications.”
Regular check-ins with your insurance professional allow them to fully understand your needs, goals, and the lender’s requirements. This ongoing dialogue helps ensure that the right parties review policies, updates are understood, and you remain aligned with lender requirements.
If you’re making changes, start the conversation with your insurance professional as early as possible to keep the process smooth and manageable. HAI Group policyholders have access to a dedicated account executive ready to guide you through every stage, ensuring you’re well-prepared and fully informed on your journey to secure funding. Are you an HAI Group policyholder planning a new project with lender support? Contact your account executive today to set yourself up for success.
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This article is for general information only. HAI Group® makes no representation or warranty about the accuracy or applicability of this information for any particular use or circumstance. Your use of this information is at your own discretion and risk. HAI Group® and any author or contributor identified herein assume no responsibility for your use of this information. You should consult with your attorney or subject matter advisor before adopting any risk management strategy or policy.
HAI Group® is a marketing name used to refer to insurers, a producer, and related service providers affiliated through a common mission, management, and governance. Property-casualty insurance and related services are written or provided by Housing Authority Property Insurance, A Mutual Company; Housing Enterprise Insurance Company, Inc.; Housing Specialty Insurance Company, Inc.; Housing Investment Group, Inc.; and Housing Insurance Services (DBA Housing Insurance Agency Services in NY and MI).