FANNIE MAE GUIDELINES RAISE CONCERNS
WOULD HAVE BARRED HOME INS . ACV COVERAGE written by William Rabb , Insurance Journal
A February guideline from Fannie Mae , had it stood ( now paused as of May 8 ), could ' ve thrown a wrench into the P & C insurance industry ’ s move toward actual cash value for more homeowners and condo coverage .
A Fannie Mae spokesperson said the governmentbacked mortgage corporation , which supports a large share of the U . S . mortgage market , has clarified a long-standing guideline that requires that insurance polices provide replacement value coverage for most homes with mortgages .
“ Fannie Mae ’ s longstanding Selling Guide policy requires property insurance claims to be settled on a replacement cost basis . Updates made to Fannie Mae ’ s Selling Guide in December 2022 and February 2024 further clarified that Fannie Mae ’ s well-established property insurance requirements do not allow claims to be settled on an actual cash value basis , as well as related lender and servicer responsibilities ,” the corporation noted .
Freddie Mac , which mostly buys loans from smaller lenders , has also had its replacement-cost requirements in place for years , but early this year reiterated the stand in updated guidelines .
Some in the insurance industry have said the updates appear to mark a new emphasis on replacement coverage and away from ACV . An April 17 letter from the National Association of Mutual Insurance Companies and Big I , the Independent Insurance Agents and Brokers of America , urged the Federal Housing Finance Agency to suspend the changes
22 KANSAS INSURANCE AGENT & BROKER