Senator Schmitt Leads Colleagues in Calling for Repeal of Harmful Biden-Era Housing Regulation
Letter Urges FHFA to Reverse Mandate Limiting Homeowners’ Insurance Choice
WASHINGTON — U.S. Senator Eric Schmitt (R-MO) led a letter to Federal Housing Finance Agency (FHFA) Director William “Bill” Pulte calling for the repeal of a Biden-Era guidance that would prohibit actual cash value (ACV) homeowners’ insurance policies for federally-backed mortgages.
In 2024, at the direction of Biden’s FHFA, new policy from Freddie Mac and Fannie Mae required replacement cost value (RCV) homeowners’ insurance coverage nationwide. This one-size-fits-all approach ignores the reality of America’s diverse housing market and would make homeownership more unaffordable, especially in rural communities where appraisals frequently fall below replacement cost.
The letter began: “As Senators representing states with rural communities, we are particularly focused on ensuring the availability of effective and diverse options in the homeowners insurance market. Recent Enterprise Seller/Servicer requirements would impose a one-size-fits-all insurance standard that does not reflect our states’ markets. This is why we are respectfully urging you to fully rescind these requirements.”
The letter stated: “As you know, Fannie Mae issued an update to Selling Guide B7-3-02, “Property Insurance Requirements for One-to Four-Unit Properties,” on February 7, 2024.[1] There is parallel guidance from Freddie Mac issued in February, 2024 and May, 2024.[2] Guidance from Freddie Mac and Fannie Mae (the Enterprises), at FHFA’s direction in the last Biden administration, would formally prohibit Actual Cash Value (ACV) insurance policies for loans acquired or guaranteed by the Enterprises. This would mandate the most expensive Replacement Cost Value (RCV) coverage for Enterprise-eligible single-family mortgages nationwide. This generates significant challenges for the families we represent.”
The letter continued: “RCV coverage pays the amount needed to repair or replace damaged property, with no deduction for depreciation-related factors.[3] A roof with significant wear, for example, is treated as a new roof for the purposes of RCV insurance. But in our states, housing markets and would-be homebuyers are diverse, not uniform. Homes in our states have striking differences in age, value, weather exposure, and even appraised valuations that fall under or soar over reconstruction costs. For some of these homes and homeowners, ACV insurance is a far more appropriate coverage at a preferable cost point. Prohibiting ACV insurance then gives consumers fewer options, leaving them with higher premiums and insurance policies that may not fit what it insures; in turn this will drive many of our constituents out of the Enterprises’ eligible mortgage market entirely.”
The letter concluded: “We believe consumers should have access to a range of insurance products that reflect their needs, circumstances, and local markets. By mandating only one product type nationwide, the Enterprises limit consumer choice, reduce competition, and impose higher costs on borrowers, particularly those in rural America. We understand that this is guidance that your administration inherited.”
Read the full letter HERE.
The letter was co-signed by: Senators John Curtis (R-UT), Pete Ricketts (R-NE), Bill Hagerty (R-TN), Ted Budd (R-NC), Ashley Moody (R-FL), Katie Britt (R-AL), John Cornyn (R-TX), Roger Wicker (R-MS), Kevin Cramer (R-ND), Steve Daines (R-MT), Deb Fischer (R-NE), Marsha Blackburn (R-TN), Jon Husted (R-OH), Tim Sheehy (R-MT), Todd Young (R-IN), Mitch McConnell (R-KY), Bernie Moreno (R-OH), and Jim Banks (R-IN).
This letter is supported by: National Association of Mutual Insurance Companies (NAMIC), American Property Casualty Insurance Association (APCIA), Independent Agents & Brokers of America, and the Farm Bureaus of multiple states.
“America’s mutual insurers offer a range of products to meet the needs of every consumer, but the FHFA’s coverage requirements limit consumer choice and threaten to put the dream of homeownership even further out of reach. NAMIC thanks Senator Schmitt for helping shine a light on this government overreach, which only exacerbates homeowners insurance affordability and availability concerns. It’s past time for the FHFA to reverse course and accept policies that account for America’s diverse marketplaces and communities,” Jimi Grande, Senior Vice President – Federal & Political Affairs, NAMIC
“Main Street independent insurance agents are dedicated to protecting consumers and giving them real choice in how they insure their homes and property. We commend Senator Schmitt for bringing that same commitment to his work on behalf of Missourians and consumers across the country, championing their freedom to select the coverage that best meets their needs. Homeownership is central to the American Dream, and federal regulations should support—not hinder—that dream by preserving choice and avoiding unnecessary increases in insurance costs,” Nathan Riedel, SVP, Federal Government Affairs, Independent Insurance Agents & Brokers of America
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[1] Fannie Mae, Selling Guide B7-3-02, Property Insurance Requirements for One- to Four-Unit Properties (updated Feb. 7, 2024) (originally clarified Dec. 14, 2022) (requiring hazard policies to settle losses on a replacement cost basis and stating that policies settling on an actual cash value basis are “not acceptable”) (current as of Oct. 31, 2025).
[2] Freddie Mac, Single-Family Seller/Servicer Guide § 4703.2 & Seller/Servicer Industry Letters (Feb. 2024 & May 2024) (requiring claims to be settled on a replacement cost basis and stating that policies settling on an actual cash value basis, or otherwise limiting settlement below replacement cost, are not eligible; pausing certain enforcement in May 2024 but retaining the prohibition on ACV) (current as of Oct. 31, 2025).
[3] Nat’l Ass’n of Ins. Comm’rs, What’s the Difference Between Actual Cash Value Coverage and Replacement Cost Coverage? (Jan. 2, 2025), https://content.naic.org/article/whats-difference-between-actual-cash-value-coverage-and-replacement-cost-coverage (defining RCV as coverage that pays to repair or replace damaged property using materials of “like kind and quality,” without deduction for depreciation).
