03/25/2026
This is how roofs should be done with a depreciation factor.
New Rule Loosens Roof Coverage Standards
By Amy Connolly
New federal rules allow lower-cost roof coverage and ease condo standards, which may reduce premiums but leave buyers paying more after damage.
WASHINGTON — Fannie Mae and Freddie Mac are easing certain property insurance rules, a move federal officials say could help more deals move forward as insurance premiums climb nationwide.
The updates, announced by the Federal Housing Finance Agency (FHFA) in a press release, allow lenders to accept actual cash value (ACV) coverage for roofs on single-family homes and condos, rather than requiring full replacement-cost coverage in all cases.
ACV pays what the roof is worth at the time of loss, factoring in depreciation, rather than the cost to install a new one. Because older roofs are valued less, these policies typically come with lower premiums, which could ease upfront costs for some buyers. ACV policies typically cost less than replacement-cost coverage, so the change is expected to reduce insurance premiums tied to mortgages backed by the government-sponsored enterprises, the FHFA said. Borrowers will still need replacement-cost coverage for the rest of the home.
But the tradeoff can be significant.
If a roof is damaged, ACV coverage could leave the homeowner paying more out of pocket to fully replace it. Real estate licensees wishing to avoid post-roof damage exposure to liability are encouraged to let the purchaser’s insurance agent explain the coverage and cost differences between the respective policies.
Fannie Mae and Freddie Mac also simplified condo insurance rules, including changes to deductible limits and eligibility standards and removed a 2024 policy that the FHFA said slowed claims processing and raised costs.
Fannie Mae outlined the updates in a lender letter aligned with Freddie Mac guidance, reflecting industry feedback and rising affordability concerns tied to insurance.
