Last week, the Federal Housing Administration (FHA) proposed amending the agency’s rules to allow the use of private flood insurance on FHA-backed loans in Special Flood Hazard Areas (SFHAs).
Federal law requires flood insurance for all federal loans if the property is located in an SFHA. Current FHA regulations do not allow private flood insurance as an option and require home buyers in the SFHA to maintain an insurance policy from the NFIP to the extent that one is available.
However, the Biggert-Waters Flood Insurance Act of 2012 requires lending institutions, federal agency lenders, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac) to accept private flood insurance.
The Big “I” has been advocating on this issue before the FHA, the Federal Insurance Office and Congress. Last year, the Big “I” spearheaded submitting a joint letter urging the FHA to amend its policy to accept private flood insurance for FHA-insured loans. The eight organizations that signed the letter represent the main stakeholders involved in the home purchase process: the realtor, the mortgage lender, the insurance company, the insurance agent and the consumer.
The Big “I” supports the FHA considering the acceptance of private flood insurance. The association believes the FHA should be obligated to adhere to the same rules as Fannie Mae and Freddie Mac for private flood insurance. This will help to ensure that all homebuyers with federally backed loans have the same flood insurance options.
The FHA is expected to release a proposed rule at the end of 2018 or sometime in 2019.
Jennifer Webb is Big “I” federal government affairs counsel.