New Law Carries Implications For Roofing and Insurance—Here’s What Investors Need to Know

As if homeowner’s insurance weren’t expensive enough, a new federal rule has quietly moved the responsibility to pay for roof damage claims off the insurers’ shoulders and onto property owners. This means that after storm damage, investors must foot the cost for damage to their roofs—if they opt to pay less for their insurance—which could result in five-figure bills for landlords, eliminating hard-won cash flow in one fell swoop. The Specifics of the New Rule According to MarketWatch, the Federal Housing Finance Agency (FHFA) announced in March that Fannie Mae and Freddie Mac will now accept homeowner’s insurance policies that provide only actual cash value (ACV) coverage for roofs, rather than requiring full replacement cost coverage as they did previously. This means that when investors buy new insurance, if they have mortgages covered by Fannie and Freddie, they no longer have to maintain insurance that covers what it costs to fully replace a roof after a storm—only the depreciated value, taking into account the roof’s age and condition. The change is not mandated—i.e., it is not a strict requirement that landlords “must” buy ACV insurance. They still have the option of paying m...