FHA Proposes Private Flood Insurance Option
Living in a flood area can be stressful, and the insurance associated with flood zones is costly. For those with Federal Housing Administration (FHA) mortgages living in federally designated flood areas, there may be good news on the horizon. Since 1999, FHA policies have prevented buyers with FHA-insured mortgages from getting flood insurance from any source other than the National Flood Insurance Program (NFIP). But a new FHA rule may begin to allow those borrowers to choose private insurance to cover floods, which could help reduce costs.
The FHA has proposed a rule that could allow homeowners in flood zones to take out a private flood insurance option, as opposed to the mandated flood insurance provided through the NFIP. This rule would allow lenders to begin accepting private flood insurance policies for single-family homes located in Federal Emergency Management Agency-designated flood zones, where such insurance is required.
If private insurance policies begin to be accepted, the FHA estimates that 3% to 5% of its borrowers could choose a private insurance policy for their FHA-insured mortgage. FHA’s deputy assistant secretary, Joe Gromley, says, “Allowing participation by private insurers could generate the competition needed to ultimately reduce costs for consumers.” And NAR’s president, Vince Malta agrees, stating, “Outdated federal regulations have for too long prohibited lenders from accepting private flood insurance that is often more affordable and more comprehensive than NFIP policies.”
Though nothing is yet finalized, this is certainly a step in the right direction. Keep checking to see where they land, and of course, to learn more about this, be sure to read the whole story.
Though we at Metro REIG don’t deal with insurance, we are experts at handling property management and real estate. Whether you’re looking for a realtor, or someone to manage your property, we can help.
