Fannie and Freddie Update Homeowner’s Insurance Requirements for Servicing

On March 18, 2026, U.S. Federal Housing announced via a press release that Fannie and Freddie are removing certain Homeowner’s Insurance Requirements. The relevant Servicing guidance from both Fannie and Freddie follows below, copied directly from the respective Lender Letter and Bulletin.

Fannie Mae Updates on Property Insurance for Servicers - Lender Letter 2026-03:

Effective Date:

With respect to all servicing policies in this Lender Letter, servicers are encouraged to implement these changes immediately but must do so by Jan. 1, 2027.

Background behind the Lender Letter (“LL”):

Fannie Mae published the LL in response to industry feedback and evolving market conditions, announcing various updates to project standard policies, and property insurance requirements for one-to-four unit properties and project developments.

What’s Portions of the Guide are being Updated:

Servicing Guide B-2-01, Property Insurance Requirements Applicable to All Property Types and B-2-02, Property Insurance Requirements for One-to Four-Unit Properties.

Highlights of the Updates:

Property Insurance Policies:

• The letter is updating requirements for Servicers to monitor property insurance policies for one-to four-unit properties are as follows:

• • While the servicer remains obligated in accordance with Selling Guide A2-1-03, Indemnification for Losses, the following table describes Fannie Mae’s minimum requirements for monitoring property insurance policies depending on whether the policy obtained is a new or renewal policy.
  • Upon identifying that a property insurance policy does not comply with one or more of the above requirements, the servicer must notify the borrower of the insufficiency.
  • The servicer must have procedures that describe the methods used to adhere to the minimum monitoring requirements.
  • If the servicer relies on a process to monitor for instances when a policy’s coverage amount decreases, the procedures must describe the methods used to monitor for coverage decreases and the subsequent steps to confirm evidence of coverage that meets our requirements. Additionally, the servicer’s procedures must describe the steps, as applicable, used to attempt to resolve a noncompliant property insurance policy, which may include lender-placed insurance.
    

Annual Insurance Reminder:

At least annually, the servicer must provide a reminder to the borrower of their responsibility to maintain insurance on the property and recommend they contact their insurance provider to review their coverage. The servicer is authorized to include such reminder in or with another borrower communication and may refer the borrower to applicable borrower-facing insurance information on Fannie Mae’s or the servicer’s website. Additionally, the servicer is authorized to use any outreach method permitted by applicable law.

Lender-placed insurance:

• Fannie Mae is modifying requirements related to obtaining lender-placed property insurance coverage, as described in Servicing Guide B-2-01, Property Insurance Requirements Applicable to All Property Types.

• The servicer must obtain lender-placed insurance in response to notification that coverage is being cancelled, non-renewed, or has lapsed, in accordance with Servicing Guide B-6-01, Lender-Placed Insurance Requirements. All other requirements in Servicing Guide B-2-01, Property Insurance Requirements Applicable to All Property Types remain unchanged.
  

Freddie Mac - Bulletin 2026-C:

Background behind the Lender Letter (“LL”):

In consultation with FHFA and in alignment with Fannie Mae, Freddie is updating the Guide to address concerns related to insurance market trends and operational challenges.

Highlights of the Updates:

1- to 4-Unit Property Insurance Requirements - Coverage Sufficiency Requirement, Including Roofs:

• Seller/Servicers are no longer required to verify the replacement cost value (RCV) to ensure coverage sufficiency for 1- to 4-unit properties. The minimum coverage limit calculation involving the UPB and 80% of the RCV, along with the corresponding examples and RCV verification requirements, have been retired. Also, the requirement for roofs to be covered on a replacement cost basis has been retired. Requirements are now as follows.

• The property securing the Mortgage must be covered by an insurance policy that provides coverage on a replacement cost basis, excluding roofs.

• Note: Roofs must be insured but do not have to be covered on a replacement cost basis.
• Note: We recognize that some insurers may issue policies that provide coverage on an actual cash value basis for personal property and structures that are not buildings. In the event that the Seller or Servicer sees such terms in a policy, this is acceptable.
  

Servicing Requirements - Effective January 1, 2027, Servicers Are Encouraged to Implement Immediately:

• Minimum insurance monitoring requirements. For each Freddie Mac-owned Mortgage it services, the Servicer must:

  • Confirm, at least annually (or upon policy renewal or replacement), that the Mortgaged Premises is insured and the coverage meets or exceeds the minimum insurance requirements outlined in Chapter 4703; and
  • Have reasonable policies, procedures and controls in place to:
  • Confirm insurance policies meet the minimum requirements in Chapter 4703
  • If an initial insurance review cannot determine whether an insurance policy meets the minimum requirements in Chapter 4703, obtain additional evidence of insurance.
  • If the Servicer must obtain additional evidence of 1- to 4-unit property insurance coverage sufficiency, it may, as an alternative or supplement to other methods of evidencing replacement cost, monitor the dwelling coverage limit for renewal policies. If the dwelling coverage limit compared to the prior year’s policy has decreased, then the Servicer may not consider this as additional evidence of coverage sufficiency.
  • In instances where reasonable efforts to obtain additional evidence that the insurance policy meets the minimum requirements of Chapter 4703 have been exhausted and failed, the Servicer must document these efforts in the Mortgage file.

• Notify the Borrower when the Servicer identifies a 1- to 4-unit property insurance policy that does not meet one or more of the following minimum requirements outlined in Sections 4703.1 and 4703.2:

• • Carrier licensing, assessment and rating
  • Coverage sufficiency
  • Perils
  • Deductibles

• General property insurance requirements and evidence of insurance requirements:
  

• • Freddie Mac is updating the general property insurance requirements to state that for as long as Freddie Mac owns a Mortgage, the Servicer must:

  • Ensure that the Mortgaged Premises is covered by insurance meeting the requirements of Chapters 4703 and 8202; and
  • Ensure property and flood, when applicable, insurance premiums are paid; and Obtain Lender-Placed Insurance (LPI) when required in accordance with applicable law, the Security Instrument and the Guide. See Section 8202.6 for LPI requirements.

• Freddie Mac also added the following requirements related to annual insurance reminders:

• • At least annually, Servicers must provide a reminder to Borrowers of their responsibility to maintain insurance on the Mortgaged Premises and recommend they contact their insurance provider to review their coverage.
  • Servicers may include this reminder in any existing Borrower communication, refer the Borrower to applicable insurance information on the Servicer’s website or direct the Borrower to insurance resources on Freddie Mac’s website.
  • Servicers may deliver this notice via any method as permitted by applicable law, including, but not limited to, e-mail, text messaging, voice response unit technology or a Servicer’s web portal.

Please Note:

This correspondence summarizes some of the recent updates to the published guidance from Fannie Mae and Freddie Mac (the Government-Sponsored Enterprises or GSEs), but it is not intended to be a complete list. Accordingly, it is recommended to review all items that Fannie and Freddie have published. Further, the GSE’s may at any time update, change, remove, or otherwise alter any of the resources referenced herein, and readers are encouraged to regularly review the GSE’s source materials for any relevant updates, changes, or alterations. Please review the entire applicable Lender Letter and Bulletin; do not rely solely on this correspondence. This is being shared solely for informational purposes only.