New York bill proposes state-backed home equity insurance

A new Republican-backed bill in the New York State Assembly seeks to create a first-of-its-kind Home Equity Protection Insurance Program, which would enable the state to directly insure the full value of owner-occupied homes against market-driven equity loss for income-qualified residents.

Assembly Bill A07484, introduced by Assembly member Alec Novakhov and co-sponsored by several GOP lawmakers, would authorize the state’s Housing Finance Agency to issue insurance policies covering the full appraised value or purchase price of a home — including rehabilitation costs — at the time of purchase. The protection would apply exclusively to one-to-four family homes, condos, and co-ops occupied by owners who meet low-to-moderate income thresholds.

Key features of the proposed program include:

• State-issued equity coverage would pay out the difference between a home’s insured value and its eventual sale price — provided the owner has lived in the property for at least three years.
• Claims would be denied if the equity loss stems from owner neglect of the property’s condition.
• A newly created Home Equity Protection Insurance Fund would function as a revolving reserve, supported by policy premiums and maintained at a minimum of 20% of insured exposure.
• Investments of fund assets would follow conservative banking or Treasury-backed instruments to ensure liquidity and capital safety.

If enacted, the bill could introduce a state-subsidized public competitor into the real estate insurance space - albeit narrowly tailored to protect homeowners from equity loss, not traditional hazards. While the coverage is distinct from standard homeowners insurance, the program might still influence consumer behavior, lender risk mitigation strategies, and private mortgage insurance dynamics in the affordable housing market.

For private insurers, especially those offering title, mortgage, or credit risk products, the bill raises several considerations:

• Underwriting overlap in low-income lending scenarios.
• Possible impact on loan-to-value ratios, credit enhancements, or default recovery estimates.
• Expanded role of the Housing Finance Agency as both insurer and fund administrator, creating quasi-regulatory influence.