The Federal Housing Administration on Tuesday proposed allowing a private flood insurance option instead of insurance through the National Flood Insurance Program when flood insurance is required by FHA.
The rule would allow lenders to accept private flood insurance policies for single family insured loans for homes located in Federal Emergency Management Agency-designated Special Flood Hazard Areas. This would be consistent with similar provisions in use by other industry participants.
“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,” Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade said. “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 proposed rule will be published in the Federal Register in the coming days and will provide for a 60-day public comment period following such publication.
“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,” Deputy Assistant Secretary for Single Family Housing Joe Gormley said. “Allowing participation by private insurers should generate the competition needed to ultimately reduce costs for consumers.”