Good News for Buyers and Sellers with Older Roofs

Fannie Mae and Freddie Mac have updated their insurance guidelines and no longer require roofs to be insured on a replacement cost basis for conventional loan eligibility. Policies that settle roof losses on an Actual Cash Value (ACV) basis—where depreciation is applied based on the roof’s age—are now acceptable.

Over the past several years, many insurance companies have shifted to ACV roof coverage once a roof reaches a certain age. Under the previous interpretation of the guidelines, this sometimes created complications during underwriting because the insurance policy did not provide full replacement cost coverage for the roof.

What this change means for real estate transactions:

• Insurance policies with ACV roof settlement may now be acceptable for conventional loans.
• Buyers may have more carrier options when insuring homes with older roofs.
• This change may reduce last-minute insurance issues or delays before closing.

While lenders may still review overall property condition and insurability, this update should help simplify the insurance portion of the loan approval process for homes with aging roofs.