Determining the Required Coverage Amount

The minimum required property insurance coverage amount for a Homium mortgage secured by a one- to four-unit property must be equal to the lesser of:

• 100% of the replacement cost value of the improvements, or

• the unpaid principal balance of the loan, provided it equals no less than 80% of the replacement cost value of the improvements.

The underwriter must verify the coverage amount is not less than the minimum required as described above, and the verification source may be the property insurer, an independent insurance risk specialist, or other professional with appropriate resources to make such a determination.

If the coverage amount does not meet the minimum required, coverage that does provide the minimum required amount must be obtained.

The following table provides the steps to calculate the amount of required property insurance coverage.

Step	Description
1	Compare the replacement cost value of the improvements to the unpaid principal balance (UPB) of the loan.
1A	If the replacement cost value of the improvements is less than the UPB, the replacement cost value is the amount of coverage required.
1B	If the UPB of the loan is less than the replacement cost value of the improvements, go to Step 2.
2	Calculate 80% of the replacement cost value of the improvements.
2A	If the result of this calculation is equal to or less than the UPB of the loan, the UPB is the amount of coverage required.
2B	If the result of this calculation is greater than the UPB of the loan, this calculated figure is the amount of coverage required.

Note: When calculating the required amount of property insurance coverage, the loan amount must be used at origination and the UPB must be used during servicing of the loan.

Examples:

Category	Property A	Property B	Property C
Replacement Cost Value	$90,000	$100,000	$100,000
UPB	$95,000	$90,000	$75,000
80% of the Replacement Cost Value	—	$80,000	$80,000
Required Coverage	$90,000	$90,000	$80,000
Calculation Method	Step 1A	Step 2A	Step 2B