Freddie Mac is changing its underwriting requirements to allow for higher homeowners' insurance deductibles.Beginning in July, the company will increase the maximum allowable deductible from 2% to 5% for fire, water, and wind damage coverage for one- to four-unit properties, condominiums, and planned-unit developments, effectively realigning its rules to match current insurance industry practices. As a result of the last two years of severe hurricanes along the Gulf Coast and Florida, most insurers have raised their minimum deductible to 5%, an automatic "disqualifier" under Freddie Mac's current guidelines. Borrowers have always had the option of choosing a higher deductible to save money, but the mandatory increase instituted by some insurance carriers has set a new floor beyond what Freddie Mac currently finds acceptable. Either way, many borrowers are being forced into the private-label market, where mortgage rates tend to be higher than in the agency market, officials said at the Mortgage Bankers Association's National Secondary Market Conference in Chicago. By acknowledging the change in insurance company practices, they said, Freddie Mac is making sure borrowers have access to lower rates.

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