12/27/24 – Insurance Update California’s New Insurance Rules: What Real Estate Agents and Clients Need to Know in 2025 As we head into 2025, California’s real estate landscape is poised to be influenced by landmark changes in the home insurance market. These new regulations, released by the state earlier this month, aim to stabilize the market and encourage insurers to write more policies in wildfire-prone areas. Real estate agents and their clients must understand the implications of these changes to navigate the challenges and opportunities they present. Key Highlights of the New Regulations The new rules allow insurers to use advanced computer models to set rates, incorporating meteorological, geographic, and other data. The new rules are a departure from the historical reliance on past losses. Additionally, insurers must account for homeowners’ efforts to make their properties fire-resistant when determining rates. A central aspect of the regulations is the commitment by large insurers - such as State Farm, Farmers, and Allstate - to write policies in high-risk neighborhoods equivalent to 85% of their statewide market share. For instance, an insurer with a 10% share of California’s homeowners insurance market must cover 8.5% of homes in wildfire-prone areas. This mandate is expected to relieve homeowners who have struggled to obtain coverage, often resorting to the FAIR Plan, the state’s insurer of last resort. What This Means for Real Estate Agents Increased Access to Insurance Buyers in high-risk areas may find it easier to secure comprehensive insurance policies, which can remove a significant barrier to closing deals. The availability of better insurance options could make properties in wildfire-prone areas more marketable. Potential for Higher Premiums Advanced catastrophe models might lead to higher insurance rates in some areas. Agents should prepare clients for potential cost increases and help them understand how these rates are determined. Focus on Fire-Resistant Features Properties with fire-resistant upgrades, such as fireproof roofing, defensible space, and upgraded windows, may benefit from lower insurance premiums. Agents should highlight these features during marketing and advise sellers to invest in such improvements. Navigating the FAIR Plan While the FAIR Plan remains an option, the new regulations aim to reduce its necessity. Agents should familiarize themselves with the nuances of the FAIR Plan and how it compares to private insurance under the new rules. What Clients Should Know Understand the New Insurance Landscape: Clients should work with their insurance providers to understand how the new regulations impact their policies and premiums. Proactively Invest in Fire Safety: Encourage clients to make fire-resistant home improvements. Insurance companies will consider these efforts when setting rates. Consult Experts: Clients buying in high-risk areas should consult insurance professionals early in the home-buying process to secure adequate coverage. Challenges and Criticisms While the new regulations aim to balance access to insurance with the realities of climate change, they have faced criticism. Consumer advocates warn of potential rate hikes and question the transparency of the proprietary models used to set rates. How effectively the regulations will compel insurers to meet the 85% coverage requirement remains to be seen. Conclusion California’s new insurance rules significantly shift how risk is assessed and managed in the state’s housing market. For real estate agents, staying informed and proactive is essential to guiding clients through these changes. By understanding the regulations and their implications, agents can better serve their clients and help them make informed decisions in 2025 and beyond. Will this lower insurance rates? I sure do hope so, but there is no guarantee! Thank you all for your continued support and trust. I hope you have a great weekend as you get ready for 2025! I’m here to support you every step of the way. Whether you have questions about a loan scenario, need help with a client, or want to brainstorm ideas, I’m just a call, text, or email away. 📞 Cell: 661-714-6258 TEXT: 661-714-6258 📞 Office: 661-260-2970 ext. 2222 📞 Direct Line: 661-291-2222 📧 Email: Mike@AugustaFinancial.com Let’s make 2025 your best year yet! Together, we can achieve great things. But wait, there’s more… Interest rates are at their highest levels since May, and all of the economic news has been pretty strong lately, which pushes interest rates higher. I am out of the predicting game, and I hope that what I say next is 100% wrong! These rates between the 6s and 7s may be what we have to look at for a while, and we can look at it as a blessing if rates go below those numbers. We are not in a 7% economy, but that’s where rates are, and we have to deal with that for now! Hoping 2025 brings lower rates, and that’s all I need! We offer 12-day escrows for pre-approved buyers - Conventional/FHA/Jumbo/Bridge loans. We provide loans in all states, so call me with anything you need. Government Loans (FHA/VA/USDA) are in the 6s. Conventional loans up to $806,500 are in the 6s and 7s. High Balance Loans from $806,501 to $1,209,750 are also in the 7’s. Jumbo loans above $1,209,750 are in the 7’s. Bank statement loans are available with 10% down again, with larger down payments in the 7’s. Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement! 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000. Private Money lenders offer Hard Money Loans with 35% down. No Ratio Loans require 30% down. DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down. Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go! 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates! Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits. **Good News for Condos:** Nothing new to report. **Bad News for Condos:** Four new issues have emerged in the SFV and one in the OC. **Portofino Villas:** 12411 Osborne – Master insurance is unacceptable. **Granada Plaza:** 16940 Chatsworth Street – Project needs critical repairs; 10% of HOA dues are not going toward reserves. **15245 Sherman Way:** More than 25% of the units are owned by one entity. **Galaxy Whitsett Condos:** 6133 Whitsett – The master insurance policy does not meet Fannie Mae’s requirements. **St. Tropez Condominium Association:** 175 Montara Drive Aliso Viejo CA 92656 – Critical Repairs or Deferred Maintenance For all other issues involving condos, please check MikeMeena.com. I will post updates here, but all the information on the naughty list is available on my website. Just go there and click about to find our most updated list. Let me know if you hear anything new about condos or townhouses. I am available this weekend if you need anything. 📞 Cell: 661-714-6258 TEXT: 661-714-6258 📞 Office: 661-260-2970 ext. 2222 📞 Direct Line: 661-291-2222 📧 Email: Mike@AugustaFinancial.com Have a great day, and an even better tomorrow! Please call me when you have a client who needs to borrow! Mike Meena President | Loan Officer Click to Call or Text: (661) 714-6258 This entry has 0 replies Comments are closed.
