Fannie Mae, Freddie Mac Announce Revisions To Condo Insurance Standards

Fannie Mae and Freddie Mac on Wednesday announced updates to condominium project standards and property insurance requirements for one- to four-unit properties and project developments, with a stated goal of reducing costs for homeowners.

“We are replacing a disruptive and expensive Biden insurance mandate with commonsense policies for today’s market,” Bill Pulte, director of the Federal Housing Finance Agency (FHFA), said in a statement. “Lower insurance costs and mortgage rates shrink the monthly payment of a new mortgage, giving new homebuyers confidence that they can afford the American dream.”

The FHFA said the government-sponsored enterprises (GSEs) are “scrapping an unnecessary clarification from 2024 that would have slowed insurance claims and driven up costs for no good reason.”

Under the updates, condo buildings can now use actual cash value (ACV) roof coverage, which pays for what the roof is currently worth, while the rest of the home retains full replacement cost value (RCV) protection. “Meaning it will be rebuilt brand-new if disaster hits,” the FHFA explained.

The agency said the change addresses the problem of full-replacement roof coverage becoming expensive. Condo buildings previously “priced out” of the mortgage market will now qualify again, the regulator explained, and the GSEs are also simplifying the maximum per-unit deductible rule.

According to the GSEs, the updates are “in response to industry feedback and evolving market conditions.”

On the project standards side, the GSEs are expanding the waiver of project review and retiring PERS review for new condo projects with attached units in Florida. Updates also include investor concentration limits and a limited review process.

The Community Home Lenders of America (CHLA) released a statement in response to the policy changes.

“CHLA commends Fannie Mae and Freddie Mac for taking actions CHLA has been calling for to create more flexible replacement cost and deductible insurance requirements for condominiums,” the statement read.

“And while CHLA appreciates the increased exemption threshold up to 10 units for limited reviews, CHLA does have concerns about ending this important option for condos more broadly. We urge Fannie and Freddie to explore ways to achieve its objectives on this issue in a less burdensome manner.”

Editor’s note: This is a developing story and will be updated as more information becomes available.