FHA to allow flood insurance from private insurance providers

The Federal Housing Administration finalized an awaited rulemaking to allow homeowners with FHA-insured mortgage financing to obtain flood insurance from private insurance providers, provided those policies conform to FHA requirements, the agency said on Monday. The change becomes effective on Dec. 21.

FHA requires that insured mortgages for properties in Federal Emergency Management Agency-designated special flood hazard areas have flood insurance. Previously, only insurance obtained through the National Flood Insurance Program was permissible for FHA-insured mortgages, which limited choices for borrowers. Bankers should note that HUD’s private flood requirements for FHA loans are distinct from the 2019 joint final rule requirements on private flood insurance from the prudential regulators.