The National Association of Mutual Insurance Companies welcomed the announcement today that government-sponsored enterprises Fannie Mae and Freddie Mac are delaying implementation of changes to guidance that would have drastically increased costs for millions of Americans.
“Today’s decision creates an opportunity for the GSEs and the Federal Housing Finance Agency to speak with insurers and other stakeholders to gather more information about the problem of underinsurance, what they can do to help, and how they can best go about it,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC. “NAMIC has been sounding the alarm that these changes, if implemented, would lead to higher costs and less insurance availability for homeowners. The GSEs made the right call in taking a step back to consider the consequences.”
The GSEs announced in February changes to their Selling Guide that would have significantly impacted every mortgage backed by Fannie Mae or Freddie Mac. While not directly aimed at insurers, which are regulated by the states, the updated guidance required that all mortgage holders with a GSE-backed loan purchase full replacement insurance coverage and the value of those replacement costs be verified annually by insurers.
“It may have sounded like a simple fix, but requiring full replacement coverage and an annual verification would come at a higher cost and may not always be the best choice for homeowners,” Grande said. “Addressing changes in the economy, growing risks due to a variety of factors, and overcoming the barriers to homeownership are not so simple as trying to force every homeowner to just buy more – and more expensive – coverage.”
With the additional time, Grande said NAMIC is ready, willing, and able to help FHFA and the GSEs develop a more appropriate policy. “We all have the same goal, reducing the number of underinsured properties,” he added. “Bringing additional voices into that conversation can only help produce a more practical and effective solution.”