761 CMR, § 21.21
At the Closing Date, the property securing each Mortgage Loan must be covered by hazard insurance including fire and extended coverage insurance, meeting the standards accepted by prudent practice and custom in the geographic area in which the property is located. The Seller may, but is not required, to collect Escrow Payments for hazard insurance premiums.
Each Mortgage Loan shall provide that in the event of any loss settlement on a hazard insurance policy the mortgagee shall have the option of applying the loss settlement proceeds against the principal amount of the Mortgage Loan (See 761 CMR 22.06) .
Sellers are responsible for compliance with the provisions of the Flood Disaster Protection Act of 1973 whenever such provisions would be applicable to a Mortgage Loan in which a Loan Participation is sold to MHMFA.
761 CMR, § 21.21