loss assessment coverage to cover gap of master HOA policy

[Kyle Barteaux]

Recently I listened our condo for sale and am now in escrow. Our HOA was dropped from insurance and picked up a new policy 6 months ago - it was the most amount of coverage the insurance company would grant them. This is now an issue for underwriting our buyers loan because there isn't enough insurance. Comment from the underwriter, the deductible is 25,000 per unit for a total of $1,900,000 (25k*76), which is more than 5% coverage amount (1,900,000 / 20,752,277) = 9.1%. HOA policy deductible must not be more than 5% of coverage. Our insurance agent suggested the buyer purchase a loss assessment policy to make up for the difference in coverage - which according to Freddie Mac could be acceptable. Has anyone heard of this working?

I'm also working with our HOA on reaching out to additional insurance brokers for additional HOA Master Policy quotes, if anyone has anyone that covers Southern California please let me know! Doing anything to get this deal closed asap.

I would appreciate any guidance from anyone that’s seen a similar situation!