FHA Proposes Private Flood Insurance for Single-Family Mortgages
November 18, 2020
The Federal Housing Administration published a proposed rule on its website that would allow a private flood insurance option instead of insurance through the National Flood Insurance Program (NFIP), when flood insurance is required by FHA.
The changes, proposed, 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)
“Our proposal would expand the options for obtaining flood insurance, rather than continuing to lock in borrowers to one federal option without any ability to comparison shop,” said Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade. “We are also proposing important safeguards that will help protect borrowers, so their homes will have flood insurance coverage at a level at or above the level available through the National Flood Insurance Program.”
The FHA said it anticipates between 3-5% of FHA borrowers could obtain a private flood insurance policy for their FHA-insured mortgage if this option becomes available.
"This proposal will remove yet another unnecessary regulatory barrier to doing business with FHA and can also reduce costs to the federal government—costs that are ultimately born by the taxpayer,” said Deputy Assistant Secretary for Single Family Housing Joe Gormley. “Allowing participation by private insurers should generate the competition needed to ultimately reduce costs for consumers.”
The FHA added that this is only a proposal; "current flood insurance policies remain unchanged at this time, including the requirement that minimum flood insurance be obtained through the NFIP."
