Fannie Mae and Freddie Mac Remove Certain Homeowners Insurance Requirements That Will Reduce Costs

Impact. This FHFA policy change requires GSE sellers and servicers to accept actual cash value (ACV) roof coverage instead of requiring replacement cost value (RCV) coverage, and updates condo insurance deductible calculations. Your origination systems, underwriting guidelines, and borrower disclosures must be modified to accommodate these expanded insurance options while maintaining GSE delivery eligibility.

Risk. The primary exposure sits in loan delivery and post-closing quality control, where outdated insurance requirements could trigger GSE repurchase demands or delivery rejections. Origination teams unfamiliar with ACV versus RCV distinctions represent the function most likely to stumble on implementation without proper training and system controls.

Recommended Action. Convene your mortgage operations and compliance teams immediately to inventory current insurance requirement documentation across origination systems, underwriting guidelines, and closing checklists. Map the specific system changes needed to flag ACV-acceptable scenarios and establish a timeline for staff training on coverage type verification before implementing borrower-facing changes.

Watch. Monitor for GSE-specific implementation guidance or effective dates, as this March announcement lacks concrete timing requirements that could create competitive pressure or examination focus areas.