ABA, Trade Groups Support HUD Private Flood Insurance Proposal

The American Bankers Association today joined a coalition of finance, housing and insurance trade groups in a letter urging the Department of Housing and Urban Development to quickly advance a proposed rule that would allow mortgagors the option to purchase private flood insurance on Federal Housing Administration-insured mortgages for properties located in Special Flood Hazard Areas.

Noting that the proposal “will provide substantial benefit to FHA borrowers,” the groups recommended that HUD align FHA with other federal agency regulations that govern the acceptance of private flood insurance. That should include adopting identical compliance aid language, adopting federal regulators’ discretionary acceptance and mutual aid society provisions and aligning the definitions of “private flood insurance,” they wrote.

The groups also supported HUD’s decision to permit—but not require—lenders to accept private flood insurance policies under the proposal.