Lower insurance costs give new homebuyers more confidence they can afford a mortgage
American borrowers has faced a growing clash between mortgage rules and the reality of a hardening insurance market.
With premiums at record levels in many states and some carriers retreating from high‑risk areas, condo associations and rural homeowners have increasingly struggled to find coverage that meets Fannie Mae and Freddie Mac requirements without blowing up monthly payments.
Against that backdrop, the Federal Housing Finance Agency announced that the government‑sponsored enterprises would accept more flexible homeowners insurance structures on loans they bought or guaranteed.
The move effectively reversed recent guidance that has pushed lenders toward full replacement cost coverage on roofs and stricter condo master‑policy deductibles.
Under the changes, Fannie and Freddie would accept actual cash value (ACV) coverage on roofs for single‑family homes and condos, while keeping replacement cost coverage on the rest of the structure.
ACV policies typically carried lower premiums but left homeowners with larger out‑of‑pocket costs after a major loss, a trade‑off consumer advocates have long warned about.
Condo projects would also see streamlined rules on master‑policy deductibles, a long‑running industry concern as wind and hail deductibles rose and some buildings risk falling out of agency eligibility.
The Mortgage Bankers Association and others have previously urged FHFA to relax its per‑unit deductible cap and allow ACV options for older roofs in order to keep projects financeable.
The relief came as originators reported more purchase deals collapsing over insurance sticker shock. “There is no single silver bullet here,” Justin Smith, a senior mortgage banker at Cornerstone Home Lending, said in an earlier Mortgage Professional America interview about climate‑exposed markets.
Steve Marks of Ohana Mortgage Solutions likewise warned that some condo master‑policy premiums were “doubling or tripling in premium cost,” squeezing buyers and lenders alike.
Property insurance costs for US homeowners with mortgages climbed to a new record in the first half of 2025, according to the latest ICE Mortgage Monitor report. The average annual insurance payment on a mortgaged single-family home jumped 11.3%, or $20 per month, compared to 2024, pushing the typical bill to nearly $2,370.
“Thanks to President Trump’s landslide victory, we are replacing a disruptive and expensive Biden insurance mandate with commonsense policies for today’s market,” FHFA director William J. Pulte said.
“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 policy package also won support on Capitol Hill.
“Imposing higher costs on families and limiting consumer choice was another outrageous example of big government overreach by the Biden Administration,” senator Eric Schmitt said.
“I’m grateful to the Trump Administration and Federal Housing Director Pulte for working with me to repeal this harmful mandate, giving families the flexibility they need and ensuring rural communities have better access to choose an insurance plan that best reflects their needs.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
