Fannie Mae and Freddie Mac Change Insurance Requirements

On March 18, 2026, Fannie Mae and Freddie Mac updated property insurance requirements as well as condo reserve fund requirements. The changes were outlined in Lender Letter LL-2026-03.

Home and condo buyers must be aware of the major changes, as they could affect the monthly costs of homeownership.

Changing Insurance Requirements

The first major change under the new Fannie Mae and Freddie Mac guidance affects homeowner insurance requirements.

Under the new rules, Fannie Mae and Freddie Mac will now allow property owners to choose Actual Cash Value (ACV) coverage on roofs for single-family homes and condos.

Actual cash value coverage means that the insurance pays what the roof is worth today. This is in contrast to replacement value coverage (RVC), which pays the amount it would cost to replace the roof at the time of a disaster.

FHFA explains that this changed requirement "fixes a real problem: full replacement roof coverage has become ridiculously expensive and hard to find in many states."

The new rule makes clear that the remainder of the house can still be covered by insurance offering replacement value coverage. Insurance will pay what it costs to rebuild a home at the time it is destroyed by a covered loss. It will not just pay the current market value of the property, but will instead provide enough to rebuild it to its previous state.

"These updates mean lower monthly payments, more first-time buyers able to close on homes, and rural communities keeping access to insurance they were at risk of losing. Homeowners still get strong protection – just at prices that actually make sense in 2026," the FHFA stated in its news release announcing the change.

However, it is important to note that the replacement cost of a new roof may be more than the fair market value. The Texas Department of Insurance provided examples.

• If it costs $10,000 to replace a roof, the replacement cost coverage will always pay the full $10,000 minus the deductible amount. So if the deductible was $4,000, the policy would pay the remaining $6,000.
• An actual cash value policy would pay a reduced amount depending on the age of the roof (which determines the level of depreciation).

The table below, sourced from the Texas Department of Insurance, shows the costs an ACV policy would pay based on the roof's age

Depending on how much premium savings you qualify for by choosing an ACV roof policy as opposed to an RCV policy, it is possible that the savings on premiums would cover the added costs. The added costs are also only incurred if a covered event destroys the roof, and insurance will pay for replacement.

Stronger Reserve Funding Requirements

Finally, Fannie Mae & Freddie Mac are increasing the minimum reserve funding requirement from 10% to a minimum of 15% of the annual budget for condo associations. And associations must follow the highest recommended amount of reserve funding identified in reserve studies.

Condo reserve requirements are money set aside by the condo association that can be used to pay for long-term capital expenses, such as roof replacements, paving, or major structural repairs, rather than just day-to-day operating expenses.

The new reserve requirements could result in increased assessments to homeowners to build the reserve funds, but the larger fund will also protect homeowners against unexpected charges for major repair expenses.

Homeowners Should Be Aware of the Changes

Homeowners should be aware of these changes as they could affect home insurance costs as well as condo association fees. An experienced mortgage professional at Freedom Mortgage can help you understand these requirements if you're buying a home or a condo, so reach out today.