Fannie Mae rules squeeze multifamily insurance market
Mortgage giants Fannie Mae and Freddie Mac changed their property-liability rules, but the shift has created problems for apartment building owners seeking financing. Danielle Lombardo from Howden US said lenders want coverage for risks that insurers refuse to offer or severely limit. Claims related to sexual abuse, firearms, animal attacks, and poor living conditions have pushed companies to exclude these protections or set very low payout caps.
Smaller landlords face the worst consequences because they lack bargaining power with insurers. Lenders force them to set aside large cash reserves for each excluded risk, sometimes exceeding one million dollars when combined with premiums. Larger property owners with better coverage terms pay far less for the same buildings.
Some owners ask lenders to waive coverage requirements, but approval demands proof of strong safety measures and vendor agreements. Two insurance companies offer separate policies for sexual abuse claims, though costs remain high. Lombardo said brokers must help all parties understand how insurance gaps threaten affordable housing and delay property repairs that benefit tenants.
