Freddie Conforming to Higher Insurance Deductibles.

Chicago -- Borrowers who opt for higher homeowners insurance deductibles or are forced into them by shell-shocked insurance carriers soon will once again qualify for lower-rate conventional mortgages.

In July, Freddie Mac will realign its underwriting rules to match current insurance industry practice by increasing 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.

The change, company officials said at the Mortgage Bankers Association's National Secondary Market Conference here last week, is in response to lenders' requests to help borrowers cope with the double whammy of higher deductibles in particular and higher insurance costs in general.

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, which limits the deductible to 2%.

Borrowers have always had the option of choosing a higher deductible to save money, ...