Mortgage giants Fannie Mae and Freddie Mac are loosening homeowners insurance requirements in an effort to lower one of the "hidden costs" of homeownership.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, said the mortgage giants would now accept mortgages from homeowners with a leaner type of insurance that covers only the current value of a roof, rather than its full replacement cost.

The policy change, which affects single-family homes and condominiums, has broad implications for homeowners with mortgages. Around 70% of all mortgages are sold to Fannie Mae and Freddie Mac and are subject to their insurance coverage guidelines.

Homeowners insurance costs have surged in recent years as home prices have risen, labor and material costs have spiked, and climate change increases the intensity and severity of natural disasters. The increases have been outpacing overall inflation and are set to continue: Insurify, an online insurance marketplace, estimated premiums jumped 12% last year to an average annual cost of $2,948 and predicts another 4% rise in 2026.

Read more: How much is homeowners insurance? A guide to lowering costs.

The mortgage giants will now accept loans with what's known as "actual cash value" insurance policies, easing a 2024 rule that required pricier insurance that covered the cost of a full roof replacement. ACV policies consider depreciation, only paying out a roof's approximate current value after a claim.

While ACV policies typically offer lower premiums than the broader "replacement cost value" policies, they can leave homeowners with higher out-of-pocket costs after a claim.

The FHFA also tweaked rules on condo insurance deductibles and limits on investor ownership of condos in an effort to make it easier for condo buyers to qualify for conventional mortgages.

"We recognize that in certain areas, rising premiums and limited insurance availability are creating challenges for borrowers and homeowners' associations," Fannie Mae wrote in a March 18 letter to lenders outlining the changes. "At the same time, we remain focused on mitigating risks of inadequate protection against property loss, including underinsurance and underfunded condo projects."

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.

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