HUD Issues Proposed Rule for Use of Private Flood Insurance on FHA Loans

Weiner Brodsky Kider PC

Weiner Brodsky Kider PC

HUD issued a proposed rule which would allow borrowers on FHA loans to use private flood insurance instead of requiring insurance through the National Flood Insurance Program (NFIP).

As a condition of receiving a mortgage loan which is insured by the Government, or for a Government Sponsored Enterprise to purchase a loan, federal law requires that borrowers who live in areas with high flood risk must obtain flood insurance through the NFIP.  The NFIP provides for federally-backed flood insurance for borrowers who live in high flood risk areas.  Changes to the relevant laws in the last decade now allow for the use of private flood insurance in certain circumstances.

HUD’s proposed rule would allow borrowers on FHA loans to use insurance from private insurers instead of obtaining flood insurance through the NFIP.  The regulations set certain standards for the use of private insurance policies with respect to coverage, terms, and certain consumer protections.  In effect, the private flood insurance policies must be at least comparable to those offered through the NFIP.  The proposed rule would also allow lenders to rely on representations from the flood insurers that a policy meets the requirements for FHA loans.

HUD is accepting comments on the proposed rule through January 22, 2021.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Weiner Brodsky Kider PC | Attorney Advertising

Written by:

Weiner Brodsky Kider PC

Weiner Brodsky Kider PC on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.