NAMIC Applauds Congressional Letter on FHFA Insurance Mandate

The National Association of Mutual Insurance Companies welcomed a letter from Rep. Mike Flood, R-Neb., and 16 other members of the House Financial Services Committee voicing concern about a Federal Housing Finance Agency guidance limiting the availability of insurance coverage for homeowners.

“Owning a home is the dream for every American, but Fannie and Freddie are making it harder to see that dream come true by forcing anyone with a federally backed mortgage into one-size-fits-all insurance coverage,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC. “At a time when interest rates are high and housing supplies are low, homebuyers should have as many choices as possible when it comes to purchasing insurance that meets their needs and their budget.”

The government-sponsored entities Fannie Mae and Freddie Mac, which are supervised by the Federal Housing Finance Agency, updated their selling and servicing guidance in February 2024 to require full-replacement-cost insurance, verified annually, which is often the most expensive and prohibitive of other options approved and overseen by state regulators. The letter specifically notes that “functional state insurance regulators have allowed for a range of policy types, including ACV policies, precisely to preserve access to coverage for homeowners who might otherwise be left uninsured or unable to close on a home.”

NAMIC led opposition to this policy, outlining for the FHFA how this guidance would wreak havoc on the housing market, drive up costs for all parties involved, and exacerbate existing availability and affordability challenges. Ultimately, the GSEs made a temporary commitment to non-enforcement to work with stakeholders. However, Fannie Mae and Freddie Mac have published three updates to the Selling Guide since announcing the non-enforcement commitment last summer, each of which continues to mandate replacement cost value coverage. Confusion around the relevant provision in the guide is complicating home closings, creating yet another barrier to home ownership.

“Would-be homeowners are feeling the effects of FHFA’s decision, even with a ‘pause,’” Grande said. “Coverage is being rejected by lenders who can’t be sure what the rules are, delaying or even canceling home sales and disrupting housing markets and long-standing business relationships in communities across the country. We thank Congressman Flood for his leadership and hope to see this issue resolved swiftly.”