In 2024, Fannie Mae and Freddie Mac updated their selling and servicing guide to require homeowners to purchase full-replacement-cost insurance coverage. (Credit: Courtesy photo)
The National Association of Mutual Insurance Companies (NAMIC) has released a statement applauding a letter from Representative Mike Flood and other members of the House Financial Services Committee addressing concerns about the Federal Housing Finance Agency’s (FHFA) guidance on homeowners insurance.
According to the NAMIC, government-sponsored entities (GSE) Fannie Mae and Freddie Mac, which are supervised by the FHFA, updated their selling and servicing guide in early 2024 to require homeowners to purchase full-replacement-cost (RCV) coverage, which is to be annually verified.
It states, in part: “Mandating RCV policies not only restricts consumer choice but also imposes significant cost burdens on families already facing steep affordability challenges in the housing market. In many regions—particularly those vulnerable to natural disasters or with elevated risk profiles— full replacement cost insurance is either prohibitively expensive or increasingly unavailable. Functional state insurance regulators have allowed for a range of policy types, including ACV policies, precisely to preserve access to coverage for homeowners who might otherwise be left uninsured or unable to close on a home. The GSEs’ effective ban on ACV products undermines that balance and results in fewer coverage options, delayed closings, and in some cases, lost home sales.”
It also notes that one-size-fits-all insurance mandates run counter to the goal of making homeownership more attainable.
The NAMIC has been openly opposed to the RCV policy requirement and has outlined to the FHFA that they believe it will impact the housing market by driving up costs for all parties and exacerbating existing affordability and availability challenges.
The NAMIC release states that the GSEs made a temporary commitment last summer to not enforce this policy in order to work with stakeholders. However, both Freddie Mac and Fannie Mae have reportedly published three updates to their selling guide since announcing the non-enforcement that all mandate RCV coverage.
“Would-be homeowners are feeling the effects of FHFA’s decision, even with a ‘pause,’” NAMIC Senior Vice President of Federal and Political Affairs Jimi Grande said in the release. “Coverage is being rejected by lenders who can’t be sure what the rules are, delaying or even canceling home sales and disrupting housing markets and long-standing business relationships in communities across the country. We thank Congressman Flood for his leadership and hope to see this issue resolved swiftly.”
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