The guideline would explicitly deem actual cash value coverage to be unacceptable, require replacement cost coverage.

WASHINGTON, D.C., May 9, 2024— On Wednesday, Fannie Mae and Freddie Mac announced the postponement of a June 1 implementation of updates to their selling and servicing guides to clarify various lender and servicer responsibilities related to monitoring and verifying property insurance coverage.

Among other things, the updated guidance—which was directed by the Federal Housing Finance Agency (FHFA) earlier this year—would require homeowners to obtain replacement cost value (RCV) coverage for all aspects of their homes and explicitly states that actual cash value (ACV) coverage is unacceptable. Importantly, this mandate includes roofs, even though lenders and servicers in the vast majority of states have long accepted the use of ACV for roofs.

The U.S. property insurance market is experiencing a multitude of challenges with many homeowners facing significant availability or affordability issues. If implemented, this guidance would have a real-world impact on the many homeowners who are unable to satisfy the coverage requirements or who are forced to purchase a higher-cost insurance product to do so. Obtaining adequate coverage for roofs in particular is difficult in the current hard market and this would further complicate that problem.

“We are hearing regularly from independent agents throughout the country on the challenges they face finding sufficient and affordable property insurance coverage for their customers, particularly for roofs,” says Charles Symington, Big “I” president & CEO. “The property insurance market is under significant stress already and this updated guidance would have only exacerbated that.”

The Big “I” was the only agent trade association to weigh in on this issue with the FHFA and government-sponsored enterprises (GSEs), communicating with each and submitting a joint letter with the National Association of Mutual Insurance Companies stating that the guidance would worsen existing challenges in the property insurance market.

“The Big ‘I’ is thankful for the postponement of this guidance, recognizing the potential burden it could place on consumers and the economy during this hard market,” says Nathan Riedel, Big “I” senior vice president for federal affairs. “We look forward to working with FHFA, Fannie Mae and Freddie Mac, and other stakeholders on these property insurance requirements.”

Founded in 1896, the Independent Insurance Agents & Brokers of America (the Big “I”) is the nation’s oldest and largest national association of independent insurance agents and brokers, representing more than 25,000 agency locations united under the Trusted Choice brand. Trusted Choice independent agents offer consumers all types of insurance—property, casualty, life, health, employee benefit plans and retirement products—from a variety of insurance companies.

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