Fannie Mae and Freddie Mac Revise Insurance and Condo Requirements

JD Supra Finance & Banking

Published March 30th, 2026

Detected March 31st, 2026

Summary

FHFA directed Fannie Mae and Freddie Mac to revise selling and servicing guide requirements for homeowners insurance and condominium project reviews. Key insurance changes include retirement of lender documentation requirements for replacement cost value on one-to-four-unit properties and permitting actual cash value coverage for roofs, with a $50,000 per-unit deductible cap. Condominium reserve requirements increase from 10% to 15% of annual budgeted assessment income, streamlined review exemptions expand to projects with up to 10 units, and Florida's separate condo project approval process is eliminated. Insurance changes took effect immediately while project review changes phase through early 2027.

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What changed

FHFA announced on March 18, 2026, that Fannie Mae and Freddie Mac would remove and revise homeowners insurance and condominium project review requirements across their respective selling and servicing guides. Insurance changes include retirement of the 2024 requirement for lenders to document replacement cost value for one-to-four-unit properties, authorization of actual cash value coverage for roofs on single-family homes and condo buildings (replacement cost still required for other property elements), a flat $50,000 maximum per-unit deductible, and retirement of inflation guard endorsement requirements for master property insurance policies. Condominium changes include expanded streamlined review exemptions for projects with up to 10 units, elimination of the 50% investment property concentration limit for established projects, elimination of separate Florida approval processes for new attached-unit condo projects, and increased minimum replacement reserves from 10% to 15% of annual budgeted assessment income.

Lenders and servicers must immediately stop requiring replacement cost value documentation for one-to-four-unit properties and implement the new $50,000 per-unit deductible cap. Servicers must establish annual borrower outreach to review coverage. Condominium lenders and HOAs should prepare for reserve requirement increases to 15% of budgeted assessment income and enhanced reserve study requirements, with phased effective dates through early 2027. The Florida separate approval elimination and streamlined review expansions provide immediate relief for smaller condo projects.

What to do next

Update documentation requirements for one-to-four-unit property insurance to allow actual cash value coverage for roofs only
Implement $50,000 per-unit deductible cap for master property insurance policies
Establish annual borrower outreach program requiring reminders to review homeowners insurance coverage
Review condo project reserve budgets and update to 15% of annual budgeted assessment income by phased effective dates through early 2027

Source document (simplified)

March 30, 2026

Fannie Mae and Freddie Mac revise homeowners insurance and condominium requirements

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On March 18, the FHFA announced that Fannie Mae and Freddie Mac (i.e., the enterprises) would remove and revise certain homeowners insurance and condominium project review requirements across their respective selling and servicing guides in response to what the FHFA characterized as “skyrocketing” insurance costs. Among the most significant changes, the enterprises retired a 2024 requirement that lenders document replacement cost value to confirm property insurance coverage sufficiency for one- to four-unit properties and now allow actual cash value coverage for roofs on single-family homes and condo buildings, though replacement cost coverage remains required for the rest of the property. The enterprises also set a per-unit deductible rule establishing a flat $50,000 maximum, retired the inflation guard endorsement requirement for master property insurance policies, and introduced a new annual requirement for servicers to remind borrowers to review their coverage, among other updates.

With respect to condo project reviews, the enterprises expanded eligibility for streamlined review exemptions to include new and established projects with up to 10 units, retired the 50 percent investment property concentration limit for established projects, and eliminated the requirement that new attached-unit condo projects in Florida undergo a separate approval process. The enterprises additionally increased minimum replacement reserve requirements for condo projects from 10 percent to 15 percent of annual budgeted assessment income and enhanced reserve study requirements. Many of the insurance changes took effect immediately, while the project review and reserve changes carry phased effective dates through early 2027.

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