Homeowners insurance is labeled as one of the
hidden costs for property owners, and
their escalating prices could have an impact on the secondary and capital markets, in terms of loan salability and performance.
While both Fannie Mae and Freddie Mac declined to be interviewed for this article, they jointly created a blog post on May 20 explaining their home insurance requirements, which call for a replacement cost value policy, rather than the alternative, for actual cash value. The latter allows insurers to estimate the cost of things like the age and wear and tear of the property, and then deduct the total depreciation amount from the insurance claim payout.
The premiums for an ACV policy are typically more affordable, but also the payout is likely lower, said the post from Terri Merlino, senior vice president and chief credit officer for Freddie Mac’s single-family business, and Cyndi Danko, who holds the same titles at Fannie Mae.
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