Key takeaways
- The 5% cap is of your coverage amount, not of a claim — and it applies to each peril deductible separately, so a wind or wildfire deductible is measured on its own.
- Roof-only actual cash value stopped being a replacement-cost problem on 18 March 2026 — not on the August topic date, which is only when the change was written into the guide. At origination. On an existing loan the servicing-side cross-reference to it is voluntary until 1 January 2027, so a servicer still applying the old rule is not out of compliance yet.
- Actual cash value on your personal property is expressly acceptable, under a Note to the same section — though read that Note narrowly: it covers personal property and “structures that are not buildings”, and a shed or detached garage is a building — and a FAIR Plan or a state wind pool is acceptable too, on the condition that it was “the only coverage that can be obtained at the time of the loan closing or policy renewal”.
- An insurer needs to clear only one rating agency's floor, not all four — and the same topic carries a rarely-read exceptions section that can disapply the requirement or change how it is met.
- The Selling Guide is an origination standard. A loan you already have is serviced under Fannie Mae's Servicing Guide, which adds servicer-only duties on top of the Selling Guide's substance rather than replacing it — and under your mortgage instrument. Asking which document a demand comes from is the most useful question on this page.
Need a policy that clears the requirement before your closing or renewal date? A licensed agent can work to the 5% cap and the rating floors directly.
Call [PENDING][PENDING]. Calls are answered by [PENDING], a licensed insurance agency (NPN [PENDING]). HomeCoverDesk is not affiliated with any insurer. Calls may be recorded or monitored for quality and training purposes. Our partner does not offer every insurer or every product available in your state.First, which document is the demand actually coming from?
This is the question that decides everything else, and almost nobody asks it. There are four different sources a property-insurance demand can come from, and they are not interchangeable.
1. The Selling Guide. Fannie Mae's B7-3-02 and B7-3-01 set what a policy must look like for a loan to be sold to Fannie Mae. This is an origination standard. It is published, it is short, and the rest of this page quotes it.
2. The Servicing Guide. A different document for a loan already made. Fannie Mae's Servicing Guide B-2-01, topic dated 08/12/2026, opens its servicer-responsibilities section: “The servicer must have policies and procedures in place to ensure that required property insurance is continuously maintained on the subject property.” It supplements the Selling Guide rather than replacing it — its own overview describes “additional requirements only applicable to servicers” and refers back to the Selling Guide for the substance. For a one- to four-unit property the topic that matters is B-2-02, also topic dated 08/12/2026, which tells your servicer to confirm the policy meets the requirements for “required perils, coverage sufficiency, and maximum deductible, as described in Selling Guide B7-3-02”. So the substance is the same. What is different is that the Servicing Guide adds monitoring duties of its own, on its own timetable.
3. Your mortgage instrument. The deed of trust or mortgage you signed contains its own property-insurance covenant. We are not going to tell you what yours says — we have not read it, and the terms vary — but federal law is built around the assumption that it is there and that it is what binds you: a servicer may charge for force-placed insurance only with “a reasonable basis to believe that the borrower has failed to comply with the mortgage loan contract's requirement to maintain hazard insurance” (12 CFR § 1024.37(b)). The contract — not the Selling Guide. Read your own insurance covenant before you conclude a demand is unfounded.
4. The servicer's own overlay. An internal condition stricter than either guide. See the last section.
So a page that tells you the Selling Guide says X and therefore your servicer cannot require Y is overstating its case, and we are not going to. What the published requirements give you is a floor you can read and a vocabulary for the conversation — which is a great deal more than most people rejected by a servicer are working with.
Here is what B7-3-02 and B7-3-01 actually require.
| The requirement | What the guide actually says | What a failure takes to fix |
|---|---|---|
| Required perils | The section opens with two sentences, and the second is the mandatory one. A policy “should be written on a “Special” coverage form or equivalent” — but “At a minimum, the coverage must include the perils listed in the following table.” The table lists: fire or lightning; explosion; windstorm (the guide adds “including named storms designated by the U.S. National Weather Service or the National Oceanic and Atmospheric Administration by a name or number”); hail; smoke; aircraft; vehicles; riot or civil commotion. If one is excluded or limited, “the borrower must obtain an acceptable policy (e.g., stand-alone policy) that provides adequate coverage for the limited or excluded peril” | A separate policy for the excluded peril — which is what a windstorm or wind-pool policy is. Note the split: the form is a should; the perils are a must |
| Deductible too high | “The maximum allowable deductible for all required property insurance perils for one-to four-unit properties is 5% of the property insurance coverage amount.” And separately: each individual peril deductible — windstorm, wildfire — “must not exceed 5% of the property insurance coverage amount” | Usually an endorsement rather than a new policy |
| Loss settlement terms | Sufficiency is “determined based on confirming the policy's loss settlement terms”. The policy “must provide coverage on a replacement cost basis, with the exception of roofs” | A coverage change, and it will usually raise the premium. But see the next table — roofs are carved out, and so is personal property |
| Insurer below the rating floor | Four agencies are named and the floor differs by agency. Only one needs to be met — and B7-3-01 carries its own list of exceptions to the rating requirement | Potentially a new policy with a different carrier — but check the exceptions first. A second mortgage sits outside the requirement; the other two exceptions change how it is satisfied rather than removing it |
Notice what the deductible row does not say. The cap is 5% of the property insurance coverage amount and not 5% of a claim. The guide does not define that term — the section that would have, ‘Determining the Required Coverage Amount’, was retired in March 2026 — so reading it as your dwelling limit is our reading rather than the guide's. On that reading, a 5% wind deductible sits exactly at the line rather than under it, whatever your limit happens to be. Our declarations-page guide covers how percentage deductibles are written.
And the guide is explicit that the cap applies peril by peril: “If the property insurance policy includes separate deductibles for different required perils, such as windstorm or wildfire, each individual deductible must not exceed 5% of the property insurance coverage amount.” A policy with a modest all-perils deductible and a large named-storm deductible is measured on the second one.
Three things people think are required and are not
One of these was never a requirement in the form people expect. Two were retired on 18 March 2026 — LL-2026-03 retired the coverage-amount documentation requirements and the roof replacement-cost requirement in the same letter. A rejection letter resting on either of those is resting on a rule that no longer exists.
| The thing a reader expects to find | What the guide says today |
|---|---|
| A required coverage amount for the hazard policy — 100% of replacement cost value, or the loan balance | There is no coverage-amount test in B7-3-02 any more. LL-2026-03 retired “the requirements related to documenting the replacement cost value to verify the property insurance policy coverage amount” and the current topic determines sufficiency by loss settlement terms alone. Read that narrowly. A coverage-amount test in exactly this shape survives elsewhere in the guide: flood insurance under B7-3-06 (topic dated 02/07/2024) must be “the lesser of 100% of the replacement cost value of the improvements, the maximum coverage amount available from NFIP, or the unpaid principal balance (UPB) of the loan (or loan amount at the time of origination)”, and a condo or PUD master policy under B7-3-03 (topic dated 08/05/2026) has its own. What went away is the origination amount test on the hazard policy for a one- to four-unit property — and even there, Servicing Guide B-2-02 still tells your servicer that if your coverage amount has decreased, or it cannot determine the prior amount, it must take steps to confirm replacement cost compliance. Choosing an adequate limit still matters to you — see our dwelling-limit page |
| Replacement cost on the roof | Retired 18 March 2026. “Roofs must be insured, but do not have to be insured on a replacement cost basis.” See the next table |
| Replacement cost on personal property, and on structures that are not buildings | A Note to the Coverage Sufficiency section says: “Fannie Mae recognizes that some insurers may issue policies that provide coverage on an actual cash value basis for personal property and structures that are not buildings.” And: “In the event the lender or servicer sees such terms in a property insurance policy, this is acceptable.” So ACV on your contents is expressly acceptable, as is ACV on a structure that is not a building — a fence, a driveway, a retaining wall, an in-ground pool. Read the phrase as written. A detached garage or a shed is a building, and the guide does not define the phrase to cover them; we are not going to tell you it does. This sits in a Note, not in the body text, and we say so |
The third row deserves emphasis because it reverses a common assumption — and because its limits matter as much as its substance. Homeowners policies commonly settle personal property at actual cash value rather than replacement cost, and homeowners are sometimes told this puts them outside the requirement. On personal property, it does not. The Note to the Coverage Sufficiency section says Fannie Mae “recognizes that some insurers may issue policies that provide coverage on an actual cash value basis for personal property and structures that are not buildings”, and that where a lender or servicer sees such terms, “this is acceptable”.
We flag that this sits in a Note rather than in the body of the section, because the distinction is real and this site has made the mistake of ignoring it before. A Note is part of the published topic; it is not the operative requirement sentence, and a careful reader is entitled to know which they are looking at.
Not sure which of the four requirements your policy failed? A licensed agent can read the declarations page against them with you.
Call [PENDING][PENDING]. Calls are answered by [PENDING], a licensed insurance agency (NPN [PENDING]). HomeCoverDesk is not affiliated with any insurer. Calls may be recorded or monitored for quality and training purposes. Our partner does not offer every insurer or every product available in your state.The rating rule, and the sentence most people miss
A rejection saying your insurer is not rated highly enough sounds like the one that costs you a carrier change. Before assuming that, there are two things in the same topic to check — one sentence and one whole section.
| Rating agency, as the guide names it | Floor, as the guide names it |
|---|---|
| AM Best Company | “B” or better Financial Strength Rating |
| Demotech, Inc. | “A” or better Insurance Financial Stability Rating |
| Kroll Bond Rating Agency | “BBB” or better Insurance Financial Strength Rating (IFSR) |
| S&P Global | “BBB” or better Insurer Financial Strength Rating |
| The sentence that matters | “An insurer is only required to meet the rating category requirement for one of the rating agencies, even if they are rated by multiple rating agencies.” A carrier failing one agency's floor is not disqualified if it clears another's |
Four agencies, four different floors, and the insurer needs to clear only one of them. The guide says so directly: “An insurer is only required to meet the rating category requirement for one of the rating agencies, even if they are rated by multiple rating agencies.”
This matters for a specific and growing group of carriers. Several insurers writing in the states where admitted capacity has tightened carry a Demotech rating rather than an AM Best one. A servicer checking only AM Best may reach a conclusion the guide does not support — and the answer is to ask which agency was checked.
Then there is the section almost no one reads. B7-3-01 does not stop at the ratings table. It carries its own exceptions section — and the three exceptions do different things. One disapplies the requirement; the other two change how it is satisfied. The difference is the whole point.
| Exception | What it covers |
|---|---|
| Second mortgages | The rating standards do not apply to property insurance for a second mortgage unless Fannie Mae also has an interest in the first mortgage |
| Mortgage impairment insurance | Where the lender or servicer carries mortgage impairment (or mortgagee interest) insurance and that policy's issuer meets the AM Best or S&P Global floor — not Demotech, not Kroll — Fannie Mae does not require confirmation that your insurer meets the rating requirements. Read what that does and does not do. It removes Fannie Mae's confirmation step; it does not disapply the requirement, and the guide adds that in such instances “the lender should advise the borrower of Fannie Mae's requirements when it originates the loan” |
| Reinsurance with a cut-through | A policy from an insurer that does not meet the standard is acceptable only if all the conditions in the guide's table are met. They include: the reinsurer meeting the AM Best or S&P Global floor specifically; both companies authorized in the property's state; a “cut-through” endorsement making the reinsurer liable for 100% immediately on the primary insurer's insolvency; Assumption of Liability Endorsement (Form 858) or any equivalent endorsement providing 100% reinsurance and 90 days' written notice to Fannie Mae of termination of the arrangement; no contributions or assessments against Fannie Mae and no lien superior to its own; and that the insurance written under the policy cannot exceed any dollar limitation in the reinsurance endorsement. Read the guide's table rather than this summary — it satisfies the rating requirement through the reinsurer, it does not remove it |
The middle one is worth asking about, with a caveat we are going to state plainly rather than bury. Mortgage impairment insurance is something the lender or servicer carries, not you. Where they hold such a policy and its issuer meets the AM Best or S&P floor, Fannie Mae does not require confirmation that your insurer meets the rating requirements. That waives a verification step; it does not waive the requirement — the guide goes on to say that in such instances the lender “should advise the borrower of Fannie Mae's requirements when it originates the loan”. It is still a specific enough question to be worth asking by name, and it is not a guarantee of anything.
The 2026 change: roofs came out of the replacement-cost rule
This is the newest thing on this page and the most useful if it applies to you — and the date it took effect is not the date printed at the top of the guide topic.
| Question | What the documents say |
|---|---|
| Does the dwelling still need replacement cost? | Yes. “The property insurance policy must provide coverage on a replacement cost basis, with the exception of roofs” |
| Does the roof? | No. “Roofs must be insured, but do not have to be insured on a replacement cost basis.” Insured, yes. Replacement cost, no |
| From what date, if you are buying or refinancing? | 18 March 2026. LL-2026-03 announced that Fannie Mae was “also retiring the requirement to insure roofs on a replacement cost basis”, and the effective line on its one- to four-unit property insurance section reads: “These changes are effective immediately.” The 08/05/2026 topic date on B7-3-02 is when the lender letter was folded into the Selling Guide, not when the change began |
| From what date, if you already have the loan? | Not yet, and the date to hold onto is 1 January 2027. Fannie Mae's Servicing Guide B-2-02, topic dated 08/12/2026, does send a servicer monitoring your policy to “required perils, coverage sufficiency, and maximum deductible, as described in Selling Guide B7-3-02” — the topic containing the roof carve-out. But that B-2-02 text was created by Servicing Guide Announcement SVC-2026-05 of 12 August 2026, which says servicers “are encouraged to implement these changes immediately but must do so by Jan. 1, 2027” and names B-2-02 among the impacted topics. A topic date is a publication date, not a compliance date. Until 1 January 2027 a servicer still applying the old roof rule is not out of compliance. This page has been wrong in both directions on this and both are recorded in the methodology |
| So can my lender reject a policy for ACV on the roof? | Not on the basis of this requirement. Moving an older roof to actual cash value is a frequent response to an aging roof — that characterization is ours, not the guide's, and it is why this carve-out matters more than its two sentences suggest. That frequency is our observation, not the guide's |
| Does it reach Freddie Mac loans too? | The FHFA's announcement names both Fannie Mae and Freddie Mac. We could not read Freddie Mac's Seller/Servicer Guide to verify its text independently — it is behind a robots restriction we did not work around — and we are not presenting Fannie's wording as Freddie's |
Read those two quotations together. The dwelling must be insured on a replacement cost basis — and roofs are carved out of that sentence by name, then addressed separately: “Roofs must be insured, but do not have to be insured on a replacement cost basis.”
The reason this matters is on our older-roof page: a common response to a roof past a certain age is not a higher premium but a move to actual cash value on the roof alone. A homeowner facing that change, with a mortgage, reasonably worries the lender will object. On this requirement, it should not.
The dates are the part to get right, and there are two of them. The August 2026 topic date on B7-3-02 is when the change was written into the Selling Guide. The change itself was made by Lender Letter LL-2026-03 on 18 March 2026, whose one- to four-unit property insurance section states: “These changes are effective immediately.” That is the origination date.
For an existing loan there is a second date, and it has not arrived. Servicing Guide B-2-02, topic dated 08/12/2026, does now send a servicer monitoring your policy to “required perils, coverage sufficiency, and maximum deductible, as described in Selling Guide B7-3-02” — the topic carrying the roof carve-out. But that B-2-02 text was created by Servicing Guide Announcement SVC-2026-05 of 12 August 2026, and that announcement says: “With respect to the changes in Lender Letter LL-2026-03, servicers are encouraged to implement these changes immediately but must do so by Jan. 1, 2027.” The impacted topics it names include B-2-02 itself.
A note on where this came from. The FHFA also announced the change in a news release dated 18 March 2026. We cite the lender letter and the guide rather than the release, for two reasons: those are the documents a loan is measured against, and the release is written in political language that has no place on a page about your policy. The substance is the same; the guide is the authority.
If your policy is a FAIR Plan — or a state wind pool
Homeowners pushed into a residual-market mechanism often assume it will fail a lender's requirements. The guide addresses it directly, in two bullets rather than one, and the condition attached to them is the part to read.
| What the guide says | |
|---|---|
| What is allowed — first bullet | “policies obtained through state or territory insurance plans, including a state's Fair Access to Insurance Requirements (FAIR) plan” |
| What is allowed — second bullet | “other state-mandated windstorm and beach erosion insurance pools”. A wind pool is not a FAIR Plan and has its own bullet. If you are in TWIA, a beach plan or an equivalent state wind pool, this is the line that covers you — not the FAIR Plan line above it |
| The condition on both | “if they are the only coverage that can be obtained at the time of the loan closing or policy renewal”. Not a free choice — a last resort, which is what a FAIR Plan is |
| What this means in practice | If you are in a FAIR Plan because nothing else would write you, the guide contemplates that. If you chose it over an available admitted policy, the condition is not met on its face |
| The gap it does not close | A FAIR Plan is commonly a fire policy without liability or loss of use — see our FAIR Plan page. Satisfying the lender and being adequately insured are different questions |
The two bullets are not the same thing, and the difference is not cosmetic. A FAIR Plan and a state-mandated windstorm or beach-erosion pool are separate mechanisms with separate enabling statutes, and a homeowner in a coastal wind pool is covered by the second bullet, not the first. A page that mentions only FAIR Plans leaves that reader guessing.
The allowance is real and it is conditional. Both are acceptable “if they are the only coverage that can be obtained at the time of the loan closing or policy renewal”. Note the timing the guide does state: the availability test is applied at closing or at renewal. It says nothing about whether a servicer may look at the policy at other moments, and we are not going to read a shield into a silence. That is a description of a last resort — which is what these mechanisms are, and why the condition is usually satisfied by the same facts that put you there.
What it does not resolve is whether the policy is enough. A FAIR Plan is commonly a fire policy without liability or loss of use. Satisfying a servicer and being adequately insured are separate questions, and only one of them is answered by the Selling Guide.
If you are holding a rejection right now
The first step is the one that determines everything after it, and most people skip it because the letter sounds final.
| # | Do this | Why it comes here |
|---|---|---|
| 1 | Get the rejection reason in writing, naming which requirement failed | The requirements in the first table have different fixes, and “does not meet requirements” is not a reason you can act on. If the letter is a notice before force-placed insurance, Regulation X already requires a written notice with specified contents — though not a statement naming which requirement your policy failed. See the last section for what it does and does not oblige |
| 2 | Read your declarations page for the deductible as a percentage of Coverage A | The cap is 5% of the “property insurance coverage amount”, not of a claim. The guide does not define that term — the section that would have, 'Determining the Required Coverage Amount', was retired in March 2026 — so read it as your dwelling limit and treat the comparison as ours, not the guide's |
| 3 | Check whether the ACV is on the roof alone, on personal property, or on the whole dwelling | These are three different answers. Roof-only ACV is exempt; ACV on personal property, and on a structure that is not a building, is expressly acceptable under a Note; ACV on the dwelling itself is the one that fails. A detached garage or shed is a building, so it is not inside that Note |
| 4 | Check the carrier's rating against all four agencies, not one — then check the rating exceptions | Only one floor has to be met, so a rejection citing one agency may not survive the others. And B7-3-01 has its own exceptions section — second mortgages, the lender's own mortgage impairment insurance, cut-through reinsurance. They do different things: the second-mortgage one disapplies the requirement; the impairment one only removes Fannie Mae's confirmation step. Worth raising either way |
| 5 | Ask which document the requirement comes from: the Selling Guide, the Servicing Guide, your mortgage instrument, or the servicer's own overlay | These are four different sources with four different answers, and only the first two are published where you can read them. You cannot tell which you are facing without asking, and the answer determines whether there is anything to discuss |
Step 5 is the one nobody thinks to ask. Servicers apply their own overlays — conditions stricter than the published requirement, set internally. Individual lenders and correspondent aggregators do publish overlay matrices of their own, so it is not true that overlays are never written down. Several large servicers publish their own insurance-requirements page, and those are the fastest way to see one in the wild. Mr. Cooper's, for instance, states that “We require that insurance companies must carry at least a B+ rating from A.M. Best to provide coverage on our accounts” — a floor above Fannie Mae's “B” — and that “You are required to have enough insurance to cover the lower of either the replacement cost of the home or the remaining principal balance on your loan”, which is a coverage-amount test Fannie Mae no longer applies at origination. So look up your own servicer's insurance-requirements page first. What does not exist is a single consolidated register of servicer overlays covering every servicer in one place. We looked for one and found none. So the only way to know whether you are facing a published requirement or a house rule is to ask which one it is.
If force-placed insurance is what is coming, Regulation X gives you four things. 12 CFR § 1024.37, and if you are in that position these are worth more than anything else on this page:
- 45 days. The servicer must deliver or mail the notice “at least 45 days before a servicer assesses on a borrower such charge or fee” — § 1024.37(c)(1)(i). You have a runway, not a deadline that has already passed.
- A second notice, 15 days out. § 1024.37(d)(1) requires a reminder “at least 15 days before a servicer assesses on a borrower a premium charge or fee related to force-placed insurance”.
- Cancellation and a refund. Within 15 days of receiving evidence that you had compliant coverage, the servicer must “Cancel the force-placed insurance the servicer purchased to insure the borrower's property” and “Refund to such borrower all force-placed insurance premium charges and related fees paid by such borrower for any period of overlapping insurance coverage” — § 1024.37(g). Not discretionary.
- Charges must be bona fide and reasonable — § 1024.37(h).
Read the limits too. The notice must say whether your hazard insurance is expiring, has expired, or provides insufficient coverage and — if applicable — identify the type of hazard insurance the servicer lacks evidence of (§ 1024.37(c)(2)(v)). It does not require anyone to name which requirement your policy failed. This is a force-placement disclosure duty, not a general right to be told which internal overlay you tripped, and we are not going to tell you it is.
And do not let the policy lapse while this is resolved. An uninsured period triggers force-placed coverage, which protects the lender rather than you. Regulation X requires the servicer's own notice to tell you that such insurance “May cost significantly more than hazard insurance purchased by the borrower” and may “Not provide as much coverage as hazard insurance purchased by the borrower”. That is the rule's wording, and its comparison is to your own policy.
Corrections to this page (3)
We publish these rather than editing quietly. Our corrections policy explains how we handle errors.
- — We said the 2026 roof carve-out reaches an existing loan now, by cross-reference from Servicing Guide B-2-02. It does not yet. That B-2-02 text was created by Announcement SVC-2026-05 of 12 August 2026, which gives servicers until 1 January 2027 to implement the LL-2026-03 changes and names B-2-02 among the impacted topics. The carve-out applies at origination now; on the servicing side there is a second date and it has not arrived. This page had earlier made the opposite error, attaching the 2027 deadline to origination.
- — We stated that the servicers-only section of LL-2026-03 said nothing about roofs, replacement cost or loss settlement, and reasoned from that to the conclusion corrected above. That was false: the first subheading in the section is Property Insurance Requirements for One- to Four-Unit Properties, followed by Coverage sufficiency, and the section's monitoring table uses the phrase replacement cost coverage requirements throughout. The claim has been withdrawn from this page's negative-claim registry.
- — We quoted Mr. Cooper's insurance requirement beginning “Insurance companies must carry…”. The sentence begins “We require that…”; we had re-capitalised a mid-sentence fragment into a sentence.
Methodology and sources
What is quoted, and from where. Every requirement on this page is quoted from a named document with its date printed: Fannie Mae Selling Guide B7-3-01 (topic dated 12/14/2022) and B7-3-02 (topic dated 08/05/2026); Fannie Mae Lender Letter LL-2026-03 (18 March 2026); Fannie Mae Servicing Guide B-2-01 (topic dated 08/12/2026); and 12 CFR § 1024.37 as printed on eCFR. A page citing “the Selling Guide” without a topic date is citing a moving target.
Where a Note is a Note. The acceptance of actual cash value on personal property and on structures that are not buildings sits in a Note to the Coverage Sufficiency section, not in its body text, and this page labels it as such. That distinction is here because this site once published an editorial Note as though it were the document it sat beneath.
Dates, and one we got wrong. An earlier version of this page dated the roof exemption to the 08/05/2026 topic date on B7-3-02. That was the date the change was incorporated into the guide. The change was made by Lender Letter LL-2026-03 on 18 March 2026. A second audit then found that “effective immediately” is one of TWELVE effective-date statements in that letter and governs the origination sections; servicers are “encouraged to implement these changes immediately but must do so by Jan. 1, 2027”. The page now carries both dates and distinguishes them, and we record the errors rather than quietly replacing them.
Where the sources stop and we start. None of these documents says anything about which rejection reason is most common or which is least costly to remedy. An earlier version of this page asserted both in the voice of the guide, and those assertions are gone. What remains, and what you should read as ours rather than the guide's: that a deductible change is usually an endorsement; that a move to replacement cost will raise a premium; that FAIR Plan policies commonly omit liability and loss of use; that some carriers writing in tightened markets carry a Demotech rating and not an AM Best one; and the ordering of the steps table, which is an ordering of effort rather than a frequency finding. On one point the rule does back us up: Regulation X obliges a force-placement notice to say that such coverage “may cost significantly more than hazard insurance purchased by the borrower”.
Why we quote the guide and not the announcement. The FHFA announced the roof change in a news release of 18 March 2026. Two reasons we cite the lender letter and the guide instead. First, those are the documents a loan is measured against — the same rule this site learned on a carrier page, where a regulator's press release described a settlement far more broadly than the settlement itself did. Second, that particular release is written in overtly political language, and a homeowner reading about their own policy should not have to step over it. We use the release for one narrow factual point only: that it names both Fannie Mae and Freddie Mac.
What we could not read. Freddie Mac's Seller/Servicer Guide is behind a robots restriction, and we did not work around it. Freddie Mac Bulletin 2026-4 of 1 April 2026 is findable by search but is served from the same restricted host, so we could not read that either. Nothing here is presented as Freddie Mac's requirement.
What this page cannot tell you. What your servicer will actually do. The Selling Guide is an origination standard; a loan already made is serviced under the Servicing Guide and under your mortgage instrument, and servicers add internal conditions on top. Individual lenders publish overlay matrices, but there is no single consolidated register of servicer overlays, so we cannot tell you what yours contains. That is why step 5 is to ask.
Frequently asked questions
What deductible will my mortgage lender accept?
For a loan sold to Fannie Mae, the Selling Guide states: “The maximum allowable deductible for all required property insurance perils for one-to four-unit properties is 5% of the property insurance coverage amount.” The cap is measured against your coverage amount, not against a claim, and each peril deductible is measured separately — a windstorm or wildfire deductible “must not exceed 5%” on its own.
Can my lender reject actual cash value coverage on my roof?
Not on the basis of the replacement-cost requirement, as that requirement now reads. B7-3-02 says the policy “must provide coverage on a replacement cost basis, with the exception of roofs”, and separately that “Roofs must be insured, but do not have to be insured on a replacement cost basis.” This has been the rule since 18 March 2026, when Lender Letter LL-2026-03 retired the roof requirement effective immediately; the 5 August 2026 topic date is when it was written into the guide. The rest of the dwelling still needs replacement cost.
My contents settle at actual cash value. Does that fail?
No. A Note to the Coverage Sufficiency section states that Fannie Mae “recognizes that some insurers may issue policies that provide coverage on an actual cash value basis for personal property and structures that are not buildings”, and that where a lender or servicer sees such terms, “this is acceptable”. Personal property is named, so ACV on your contents is covered by it. Be careful with the second half: a detached garage or a shed is a building, and nothing we could find defines “structures that are not buildings” to include them. Fences, driveways, retaining walls and in-ground pools are the natural reading.
My insurer is not rated by AM Best. Is that a problem?
Not necessarily. The guide names four rating agencies — AM Best Company, Demotech, Inc., Kroll Bond Rating Agency and S&P Global — with a different floor for each, and states that “An insurer is only required to meet the rating category requirement for one of the rating agencies, even if they are rated by multiple rating agencies.” If a rejection cites one agency, ask whether the others were checked — and then ask about the exceptions section. A second mortgage is outside the rating requirement; a lender's mortgage impairment insurance removes Fannie Mae's confirmation step rather than the requirement; a cut-through reinsurance arrangement satisfies it through the reinsurer.
Will a lender accept a FAIR Plan policy?
The guide contemplates it. It lists as acceptable “policies obtained through state or territory insurance plans, including a state's Fair Access to Insurance Requirements (FAIR) plan” and, in a second bullet, “other state-mandated windstorm and beach erosion insurance pools” — both with the condition “if they are the only coverage that can be obtained at the time of the loan closing or policy renewal”. That condition is usually met by the same circumstances that put you in the plan.
Does the Selling Guide control what my servicer can demand?
Not on its own. The Selling Guide sets what a policy must look like for a loan to be sold to Fannie Mae. A loan you already have is serviced under Fannie Mae's separate Servicing Guide — B-2-01, topic dated 08/12/2026, which requires the servicer to have “policies and procedures in place to ensure that required property insurance is continuously maintained on the subject property” — and under the mortgage instrument you signed, which grants the lender authority over amounts and deductible levels in its own right. Regulation X frames force-placement around “the mortgage loan contract's requirement to maintain hazard insurance”, not around the Selling Guide. The published requirements give you a floor to read, not a ceiling on what your contract says.
Do these rules apply to my loan?
Only if your loan is sold to Fannie Mae. Freddie Mac maintains its own Seller/Servicer Guide, which we could not read — it is behind a robots restriction we did not work around — so nothing on this page is presented as Freddie's requirement. FHA, VA and portfolio loans have their own rules. Ask your servicer which applies.
What is a servicer overlay?
A condition your servicer applies that is stricter than the published requirement, set internally. Some lenders and correspondent aggregators publish their own overlay matrices, so overlays are not invariably secret — but there is no single consolidated register of servicer overlays, so you cannot look yours up without knowing who services your loan. Asking is the shortest route to an answer.