The proposed rule would allow consumers to purchase a private flood insurance option instead of insurance through the National Flood Insurance Program when flood insurance is required by the Federal Housing Administration.
In November, the Federal Housing Administration (FHA) proposed a new rule regarding private flood insurance. The proposal would allow consumers to purchase a private flood insurance option instead of insurance through the National Flood Insurance Program (NFIP) when flood insurance is required by the FHA.
Overall, the new proposal is a win for the Big “I" and its members after the Big “I" spent a significant amount of time over the last couple of years advocating for the FHA to accept private flood policies, including numerous letters and meetings with the FHA.
Specifically, the proposed changes would allow lenders to begin accepting private flood insurance policies for single-family insured loans for homes located in Federal Emergency Management Agency-designated Special Flood Hazard Areas (SFHAs), similar but not identical to provisions in use by other federal agencies.
Because of the importance of the FHA private flood rule, the Big “I" joined forces with other organizations that represent insurers, lenders, and realtors to submit comments on the proposed rule.
The comments note that the group of organizations strongly support the U.S. Department of Housing and Urban Development's (HUD's) proposal to allow FHA borrowers to purchase private flood insurance in a manner consistent with federal statutes and in alignment with industry standards and federal agency regulations. The comments also urged HUD to move forward with a final regulation as soon as possible.
Additionally, to allow FHA borrowers to fully realize the benefits afforded by the private flood insurance market, the organizations recommended further aligning FHA with other federal agency regulations that govern the acceptance of private flood insurance. These recommendations included: (1) adopting identical compliance aid language; (2) adopting the federal regulators' discretionary acceptance and mutual aid society provisions; and (3) aligning the definitions of “private flood insurance."
This rule is still a proposal only and FHA's current flood insurance policies remain unchanged at this time, including the requirement that minimum flood insurance be obtained through the NFIP. The Big “I" will continue to provide its members with updates on the FHA proposal through the News & Views e-newsletter.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.