A group of 11 Democratic lawmakers sent a letter to Federal Housing Finance Agency director Sandra Thompson on Oct. 1 noting the potential downstream impacts over a guidance change made by the government-sponsored enterprises under her authority. NAMIC has led opposition to this change due to its strong potential to raise costs and limit the choice of coverage available for consumers.

The lawmakers voiced similar concerns in their letter regarding the potential cost increases, reduction in consumer choice, increased premiums, and limiting the availability of insurance across the country. Having this particular group of members of Congress speak out was important: they are members of the same political party as the administration trying to make these changes. Additionally, the group included House Financial Services Committee leaders and other key Democratic lawmakers – a strong signal to the FHFA officials trying to make this change that they need to tread carefully and potentially pull back efforts to implement the directive, given the political opposition in addition to that of the insurance industry.

Government-sponsored enterprises Fannie Mae and Freddie Mac announced in lending selling/service directive materials promulgated in February that they would be requiring consumers with federally backed mortgages to secure full replacement cost insurance that must be verified annually. In short, consumers would be limited to only one kind of insurance policy – and more expensive coverage – to satisfy these requirements.

The expectation was for this directive to be implemented by June; however, NAMIC sounded the alarm across Capitol Hill and to the Biden administration to ensure that this was indefinitely delayed to avoid mass disruption for consumers and insurers. This work included a letter in partnership with the Independent Insurance Agents and Brokers; grassroots from NAMIC members; extensive back and forth with the FHFA; and calls from lawmakers to administration officials urging them to hold off.

The directive, if implemented, would be devastating for consumers – stripping them of choices when purchasing homeowners insurance, driving up costs, and causing disruption during the homebuying process. Even worse, first-time homebuyers and those purchasing fixer uppers or older homes may be hit the hardest. While there is an indefinite delay on implementation, the FHFA and the GSEs have signaled their intention to move forward with this policy change. Although this is paused for now, NAMIC has led an all-hands-on-deck approach among stakeholders that is warning consumers, lawmakers, and even industry partners of the consequences if this were to move forward in the direction the FHFA originally envisioned. Lawmakers on Capitol Hill are now making this issue a key priority.

NAMIC was also slated to testify on this issue before the House Financial Services Subcommittee on Housing and Insurance before Congress left town to campaign for the upcoming election. Unfortunately, the hearing was postponed as lawmakers left the day before the hearing, in part because of incoming Hurricane Helene. Receiving an invitation to testify is noteworthy, signaling immense concern in Congress about the series of FHFA’s decisions that led to the new replacement cost requirement. NAMIC board member Matt Benedict, president and CEO of Midstate Mutual in Auburn, N.Y., was scheduled to represent the association.

All was not lost, however. The prep work and engagement with every lawmaker on the subcommittee has brought significant progress on the issue, as these conversations led to congressional offices pushing back on the FHFA, with or without the hearing. NAMIC’s planned testimony was simply going to highlight three themes – how the directive would reduce consumer choice when selecting homeowners insurance, disrupt competition in the marketplace leading to higher costs, and encroach on the state-based system of insurance regulation. The mere existence of the hearing also warned the FHFA of the political ramifications to come if it continues to move forward with the unpopular market disrupting proposal.

While NAMIC has worked diligently with members of Congress to educate them on the ramifications of the GSEs’ directive, the association continues to work directly with the FHFA as a part of its stakeholder feedback process. NAMIC continues gathering key information to provide the agency with a clear picture of what the marketplace looks like now and what it could look like if this guidance change goes into effect.

The election is now looming over all decisions government agencies make, and there could be a transfer of power in just three months. No matter who is in charge, NAMIC continues to fight on behalf of its member companies and hits this issue from all directions, ensuring everyone from administration officials to members of Congress better understand the implications of these types of decisions and how significantly they could disrupt the marketplace for the consumers they are supposedly trying to serve.

Post Details

Publish Date

October 4, 2024

News Type

  • Special Reports

Topics

  • Federal
  • National
  • Property/Casualty
  • Regulation

Points of Contact
Jimi Grande
Jimi Grande
Senior Vice President, Federal & Political Affairs