DS News

DS News December 2020

DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.

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Page 89 of 100

88 88 INVESTMENT GOVERNMENT PROPERTY PRESERVATION INDUSTRY UPDATES NEW OPTIONS FOR FLOOD INSURANCE COVERAGE? e Federal Housing Administration (FHA) published a proposed rule on its website that would allow a private flood insurance option instead of insurance through the National Flood Insurance Program (NFIP) when flood insurance is required by FHA. e changes would allow lenders to begin accepting private flood insurance policies for single-family insured loans for homes located in Federal Emergency Management Agency- designated Special Flood Hazard Areas (SFHAs), 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." e FHA is also seeking public comment on a proposal to institute a compliance aid for private flood insurance policies. According to an FHA press release, this would allow lenders to rely on the compliance aid to determine if a private flood insurance policy meets FHA's requirements. "America's 1.4 million Realtors are grateful to see the FHA take steps to make more private flood insurance options available to U.S. consumers," said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco. Outdated federal regulations have for too long prohibited lenders from accepting private flood insurance that is often more affordable and more comprehensive than NFIP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. Although regulatory hurdles remain before this proposed rule is finalized, NAR looks forward to continuing our work alongside the FHA, HUD, and President-elect Biden's administration to make private flood insurance more readily available to American property owners, Malta continued. Malta sent a letter to HUD's Assistant Secretary for Housing, Dana Wade earlier this year, reinforcing the NAR's desire to see more private flood insurance options available in the marketplace. "NAR members can provide numerous examples where the market has offered better coverage at lower costs than the NFIP, but the 1999 rule needlessly constrained consumer choice and created inequities between FHA and more conventional loan holders," Malta wrote. "e 21-year-old rule must be updated to reflect current market realities or the FHA risks losing market share." e FHA said it anticipates between 3-5% of FHA borrowers could obtain a private flood insurance policy for their FHA-insured mortgage if this option becomes available. "is 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." e proposed rule will be published in the Federal Register in the coming days and will allow a 60-day public comment period following such publication. Comments should be submitted to FHA only through the methods specified in the notice to be published in the Federal Register. e FHA added that this is only a proposal, "Current flood insurance policies remain unchanged at this time, including the requirement that minimum flood insurance be obtained through the NFIP." Journal

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