New Fannie Mae, Freddie Mac Insurance Rules Change Roof and Condo Coverage

Homebuyers and condo owners with mortgages tied to Fannie Mae or Freddie Mac now have more flexibility in how certain property insurance is structured. But the option that may reduce premiums can also produce a smaller payment after a roof loss.

The Federal Housing Finance Agency announced coordinated changes on March 18, 2026. Fannie Mae and Freddie Mac implemented the changes through their own selling and servicing guides, so the rules mainly affect mortgages eligible for sale to or servicing under those two companies. They do not directly govern every mortgage or insurance policy in the United States.

Roofs no longer have to use replacement-cost coverage

For eligible one- to four-unit properties, the roof still must be insured, but the policy no longer has to cover the roof on a replacement-cost basis under the revised Fannie Mae and Freddie Mac requirements. The broader property generally must still meet replacement-cost standards, and other requirements for covered perils, insurer eligibility and deductibles remain in place.

The same basic exception applies to condominium, cooperative and comparable project master policies: the roof must be insured, but it does not have to be settled on a replacement-cost basis. The master policy generally must still provide replacement-cost coverage for the project improvements apart from roofs.

Actual cash value is generally the replacement cost of an item minus depreciation. That means an older roof may generate a much smaller claim payment than a replacement-cost policy would provide.

For example, if a new roof costs $20,000 but the insurer values the existing roof at $8,000 after depreciation, an actual-cash-value claim could leave the owner responsible for the remaining cost, plus any deductible. The actual settlement depends on the policy language, the roof’s age and condition, the insurer’s valuation and the applicable deductible.

The agencies permit this coverage; they do not require insurers to offer it or guarantee that premiums will fall. Pricing and availability will continue to depend on the insurer, state market, property location, roof age, underwriting and the coverage selected.

Condo master-policy deductibles can reach $50,000 per unit

For required property-insurance perils, the new rules set a maximum allowable master-policy deductible of $50,000 per unit. The figure is a ceiling, not a required deductible and not a limit that every condominium association must use.

Fannie Mae says lenders must apply the revised per-unit deductible rule to loan applications dated on or after July 1, 2026. Freddie Mac uses July 1, 2026, for mortgages with application received dates on or after that date, while encouraging sellers to implement the change earlier.

Other deductible rules continue to matter. Freddie Mac’s bulletin says a master-policy deductible for required perils generally may not exceed 5% of the building coverage limit per occurrence. Associations and lenders must therefore review the deductible structure rather than focusing only on the $50,000 per-unit ceiling.

Why HO-6 coverage may matter more

An individual condo owner generally must have an HO-6 unit-owner policy when the master policy does not cover all or part of the unit’s interior or improvements, or when the master policy includes a per-unit deductible.

Under the updated Fannie Mae and Freddie Mac standards, the HO-6 coverage limit must be at least the greater of the amount needed to restore uncovered interior portions and improvements or the applicable per-unit master-policy deductible. Freddie Mac also says the HO-6 policy must cover the applicable perils to which that master-policy deductible applies.

For example, if an association’s master policy has a $40,000 per-unit deductible for a covered peril, the unit owner may need an HO-6 policy with at least $40,000 in applicable coverage, assuming the policy and project documents otherwise require that protection. The owner should also confirm the policy’s own deductible and exclusions.

Buyers should request the association’s master-policy declarations, deductible schedule, certificate of insurance and coverage description before relying on the HOA’s policy. Governing documents may also determine which interior features are the owner’s responsibility.

What did not change

The revisions do not eliminate replacement-cost coverage for entire homes or condo buildings. In general, replacement-cost requirements still apply to the covered property and project improvements apart from roofs. Required perils, insurer standards, other deductible provisions, policy-monitoring duties and mortgage-servicing requirements also remain.

The changes also do not guarantee lower premiums. Insurance Journal reported that industry groups viewed the revisions as a response to affordability and availability concerns, particularly after earlier replacement-cost guidance affected insurance choices. That market reaction is not a promise of savings for any individual homeowner or association.

Consumer Reports’ general insurance guidance explains why actual-cash-value coverage can create higher out-of-pocket costs: depreciation is deducted from the claim payment. A lower premium should therefore be weighed against the amount an owner could need to pay after a roof loss.

Implementation dates to watch

Several related condominium rules are being phased in:

• Roof-related changes for one- to four-unit properties and project master policies took effect immediately under the March 18 Fannie Mae and Freddie Mac announcements.
• Fannie Mae’s per-unit deductible and individual-policy changes apply to applications dated on or after July 1, 2026. Freddie Mac applies related changes to mortgages with application received dates on or after July 1, 2026.
• Freddie Mac’s retirement of its Streamlined Review process and related reserve-study changes apply to applications received on or after August 3, 2026. Fannie Mae’s comparable project-review and reserve-study changes also require implementation for applications dated on or after August 3, 2026.
• Fannie Mae and Freddie Mac both set January 4, 2027, as the effective date for increasing the minimum condo replacement-reserve allocation from 10% to 15% of annual budgeted assessment income in the applicable review process.

Questions to ask before buying or refinancing

• Does the policy use replacement-cost or actual-cash-value coverage for the roof?
• What is the roof’s age, valuation method, depreciation schedule and deductible?
• For a condo or cooperative, what does the master policy cover, and what is the per-unit and per-occurrence deductible?
• Is an HO-6 policy required, and does its limit cover the applicable master-policy deductible and uncovered interior improvements?
• Does the HO-6 policy cover every peril to which the master-policy deductible applies?
• Has the lender or servicer confirmed that the policy meets the applicable Fannie Mae or Freddie Mac rules for the mortgage application date?

Homeowners and condo buyers should compare more than premiums. Roof settlement terms, deductibles, exclusions, limits and the likely out-of-pocket cost after a loss may matter more than the monthly price.

Sources

• FHFA policy announcement
• Fannie Mae Lender Letter LL-2026-03
• Freddie Mac Bulletin 2026-C
• Insurance Journal coverage

Look for updates to this story

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