The U.S. Department of Housing and Urban Development (HUD) announced that the FHA announced that it will now accept private flood insurance policies where the borrower may obtain a private policy instead of only allowing the purchase of flood insurance through the National Flood Insurance Program.
The change takes effect Dec. 21.
The modification applies to all FHA-insured Single Family Title II mortgages, including Home Equity Conversion Mortgages (HECM) and all loans insured under FHA's Title I programs.
The updated FHA regulation allows borrowers to purchase a comparable private insurance policy that meets FHA requirements for FHA-insured mortgages secured by properties in Federal Emergency Management Agency (FEMA)-designated Special Flood Hazard Areas.
Previously, only flood insurance acquired through the NFIP was permitted for FHA-insured mortgages, limiting consumers' choices.
HUD Secretary Marcia L. Fudge noted, "Flood insurance is required to ensure families and individuals are prepared if disaster strikes. Increasing consumer options... is one way we are building more resilient communities..."
Federal Housing Commissioner Julia Gordon added, "The choice to select a private flood insurance option may enable some borrowers to obtain policies that are less expensive or provide enhanced coverage."
As part of its implementation, after Dec. 21, the FHA will require lenders to provide detailed flood insurance coverage information when
electronically submitting mortgages for FHA insurance on properties in Special Flood Hazard Areas. This allows the FHA to better analyze flood insurance information on mortgages in its portfolio than previously possible.
"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," National Association of Realtors (NAR) President Kenny Parcell said.