FHFA Says Fannie Mae and Freddie Mac Will Ease Certain Insurance Rules, a Move Aimed at Lowering Borrower Costs
The Federal Housing Finance Agency said March 18, 2026, that Fannie Mae and Freddie Mac are removing certain homeowners insurance requirements that had become more expensive and harder to meet as premiums climbed across the country. The biggest change is that the enterprises will now allow actual cash value, or ACV, roof coverage in situations where replacement-cost roof coverage had driven up premiums or become difficult to obtain. FHFA said the policy shift should especially help borrowers in rural areas, condo projects, and high-cost insurance markets. For mortgage lenders, servicers, condo associations, and borrowers, the announcement matters because insurance availability has become a growing friction point in underwriting and closing. Fannie Mae’s accompanying lender letter says the changes are intended to reduce operational complexity while preserving broader replacement-cost protection for the rest of the home or project.
By Rami Ameer · 7 min read
What FHFA Announced
FHFA said Fannie Mae and Freddie Mac are removing certain insurance requirements tied to conforming mortgages in order to reduce costs for borrowers. The agency highlighted three themes: allowing cheaper roof coverage options, simplifying some condo insurance rules, and eliminating a 2024 clarification that industry participants said added cost and complexity.
In its release, FHFA said the changes are meant to respond to today’s elevated homeowners insurance costs and limited availability in some markets. The agency framed the update as a cost-cutting move that could lower monthly housing expenses for some borrowers.
The Biggest Change: ACV Roof Coverage Is Back on the Table
The headline policy shift is that Fannie Mae will now accept property insurance policies that provide replacement-cost coverage for the dwelling overall, except for roofs, which may be insured on an actual cash value basis. In plain English, that means the roof still has to be insured, but the policy does not have to pay the full brand-new replacement cost of an older roof.
That matters because replacement-cost roof coverage has become significantly more expensive in some states, and in some cases harder to find at all. By allowing ACV treatment for roofs while keeping replacement-cost protection for the broader structure, the new rule gives borrowers and insurers more flexibility without eliminating core hazard coverage.
Freddie Mac’s Bulletin 2026-C reflects the same direction, including the note that a per-unit deductible on a master property policy may not exceed $50,000 per unit, reinforcing that both enterprises are moving in alignment on these insurance updates.
Why This Matters for Borrowers
For many homebuyers, insurance has become the stealth affordability problem in the monthly payment. Principal and interest may qualify, but rising premiums can still push the total housing payment too high for underwriting or strain the household budget after closing.
These FHFA-backed changes could help in several ways:
Lower premium costs where roof replacement-cost coverage had become expensive
Improve insurance availability in markets where carriers were limiting options
Reduce closing friction for loans tied to condo projects or properties with more complex coverage structures
Help preserve access to conforming financing in rural and higher-risk insurance markets
The practical takeaway is simple: some borrowers may now find it easier to obtain acceptable coverage that satisfies agency requirements, which can improve loan eligibility and lower monthly costs.
Condo Projects Could See Meaningful Relief
Condo insurance has become one of the most difficult areas of mortgage eligibility, especially where master policies carry large deductibles or associations struggle with reserve funding and rising premiums.
FHFA said condo buildings can now use cheaper ACV roof coverage and that the “maximum per-unit deductible” rule has been simplified. Fannie Mae’s lender letter provides more detail, stating that for required perils covered by a master property insurance policy, the maximum allowable per-unit deductible is $50,000 per unit. It also says lenders are encouraged to implement that deductible change immediately and must do so for loans with application dates on or after July 1, 2026.
That may be especially important for condo associations that had been squeezed by rising master policy costs. If insurance terms are easier to fit within agency guidelines, more units may remain financeable with conforming loans.
A 2024 Insurance Clarification Is Being Retired
Fannie Mae’s lender letter says that after industry feedback, it is retiring certain February 2024 property insurance clarifications. Specifically, it is removing requirements tied to documenting replacement cost value to verify coverage sufficiency in their prior form, and it is also retiring the requirement that roofs be insured on a replacement-cost basis. For project developments, Fannie Mae is also retiring the prior requirement for inflation guard coverage.
FHFA summarized that move more broadly by saying the enterprises are scrapping an unnecessary 2024 clarification that had complicated claims and increased costs.
What Stays in Place
This is not a rollback of homeowners insurance altogether. Fannie Mae’s guidance makes clear that:
Roofs must still be insured
The broader property policy must still provide replacement-cost coverage for the home, except for roofs
Master condo policies still must meet coverage sufficiency standards
Other existing hazard insurance requirements generally remain unchanged unless specifically revised in the new guidance
That distinction matters. The policy shift is about how coverage is structured, not whether borrowers and associations need insurance.
Effective Dates to Watch
Some changes are effective immediately, while others phase in later.
Change | Timing |
|---|---|
Fannie Mae one- to four-unit roof coverage update | Effective immediately |
Fannie Mae master policy roof coverage update | Effective immediately |
Fannie Mae condo per-unit deductible update | Encouraged immediately; required for application dates on or after July 1, 2026 |
FHFA public announcement | March 18, 2026 |
Freddie Mac Bulletin 2026-C referenced in search results | Published around March 18, 2026 |
Lenders will still need to follow each enterprise’s detailed selling and servicing guidance, but the direction is clear: more flexibility on insurance structure, particularly around roofs and condo master policies.
What Mortgage Professionals Should Do Next
Loan officers, processors, underwriters, and condo review teams should not assume old insurance standards still apply in every file. The safer approach is to review current agency guidance and recheck any transaction that was delayed because of roof coverage or a condo master policy deductible issue.
Key action items include:
Revisit loans that stalled over replacement-cost roof requirements.
Review condo transactions with high master policy deductibles.
Confirm whether a file can now qualify under the updated Fannie or Freddie guidance.
Watch for updated underwriting overlays from lenders and investors.
Industry Impact: A Small Rule Change With a Potentially Broad Reach
This is the kind of policy change that may look technical on paper but could have a wide effect in practice. Insurance has emerged as one of the biggest hidden pressure points in housing affordability, especially in storm-prone markets, older housing stock, and condo-heavy areas. When agency standards become more adaptable to what the insurance market is actually offering, more loans can move from “problem file” to “clear to close.”
That does not solve the broader insurance affordability crisis. But it may remove one meaningful obstacle for borrowers trying to use conventional financing in markets where coverage options have narrowed.
FAQ
What did FHFA change on homeowners insurance?
FHFA said Fannie Mae and Freddie Mac are removing certain insurance requirements, including allowing actual cash value roof coverage in situations where replacement-cost roof coverage had added cost or complexity.
What is ACV roof coverage?
ACV stands for actual cash value. It generally pays the current depreciated value of the roof rather than the full cost to install a brand-new replacement roof.
Does this mean borrowers can skip homeowners insurance?
No. The property still must be insured. The change affects the type and structure of acceptable coverage, not the underlying requirement to carry insurance.
Will this lower monthly housing payments?
It can. FHFA said the changes are intended to reduce insurance costs, which could lower total monthly housing expenses for some borrowers. Actual savings will vary by property, insurer, and market.
Are condos included?
Yes. FHFA specifically highlighted condo buildings, and Fannie Mae’s lender letter includes updates to master policy roof coverage and per-unit deductible requirements for project developments.
Bottom Line
FHFA’s latest move is a reminder that mortgage affordability is no longer just about rates and home prices. Insurance is now a front-line underwriting issue, and when agency standards do not match the real-world insurance market, borrowers pay the price.
By easing certain roof and condo insurance requirements, Fannie Mae and Freddie Mac are trying to bring conventional lending rules closer to current market conditions. For borrowers, that may mean lower premiums and fewer closing delays. For lenders, it could mean fewer preventable insurance-related denials.
Follow Mortgage.News for more mortgage policy updates, and speak with a qualified lender if an insurance issue has been affecting your home purchase or condo financing options.
Sources
FHFA news release, March 18, 2026: “Fannie Mae and Freddie Mac Remove Certain Homeowners Insurance Requirements That Will Reduce Costs.”
Fannie Mae Lender Letter LL-2026-03, March 18, 2026.
Freddie Mac Bulletin 2026-C search result summary.