HUD Approves Private Flood Ins. for FHA Loans
Homebuyers with FHA loans for flood-zone homes have more options starting Dec. 21, providing private flood insurance “conforms to FHA requirements.”
WASHINGTON – Starting Dec. 21, 2022, homeowners with FHA mortgage financing for a property in a flood zone aren’t locked into only one flood insurance provider – the National Flood Insurance Program (NFIP). After that date, they can choose private flood insurance coverage, providing it conforms to the Federal Housing Administration’s (FHA) requirements for private insurance providers.
The U.S. Department of Housing and Urban Development (HUD) announced the change on Monday with a final rule published in the Federal Register and in a companion Mortgagee Letter, which provides implementation guidance for FHA-approved lenders.
“The choice to select a private flood insurance option may enable some borrowers to obtain policies that are less expensive or provide enhanced coverage,” says Federal Housing Commissioner Julia Gordon.
“The new rule is a victory for consumers, for choice, and for flood coverage that will protect more borrowers and property from the number one natural disaster in the United States,” says National Association of Realtors® (NAR) President Kenny Parcell. “NAR has long advocated for an updated rule to address an inequality with conventional borrowers, and this action will increase the flood insurance choices available to FHA borrowers.”
As part of the new rule’s implementation, FHA requires lenders to provide detailed flood insurance coverage information when electronically submitting mortgages for FHA insurance on properties that require it. HUD says it wants to make sure buyers are protected against flood risk as a key component of its Climate Action Plan.
“The final rule … extends to FHA borrowers more insurance choices that have been available to conventional loan holders,” says Parcell. “The previous FHA rule was written decades ago, when there was no private flood insurance market. … While the FHA rule does not perfectly align with the other federal rules, NAR stands ready to work with HUD to address any remaining differences that could create lender confusion.”
© 2022 Florida Realtors®