Borrowers with FHA-insured mortgages will soon be able to choose what flood insurance they want to purchase.
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Borrowers with FHA-insured mortgages will soon be able to choose what flood insurance they want to purchase.
According to a new rule published by the administration on the Office of Management and Budget's website last week, borrowers will be able to opt for private insurance on FHA-insured mortgages as early as February 2022.
This will undo regulations which have been in place since 1968, which dictate that FHA borrowers with properties located in flood hazard areas must purchase government flood insurance for the duration of their mortgage.
The administration noted that the new rule will benefit borrowers who want FHA-insured mortgages but also want choice when it comes to flood insurance.
In response to the rule, first proposed in 2020, the National Reverse Mortgage Lenders Association said that "private flood insurance is often more affordable and more comprehensive than NFIP policies."
"Permitting FHA borrowers to pursue private flood insurance will help engender a more robust private market and better provide consumers with greater choice and access to flood insurance across the United States," NRMLA said at the time.
The association added, "The proposal, by privatizing flood insurance risk, will also help reduce costs borne by the government, and ultimately by taxpayers."
LOs, how do you think this rule will benefit borrowers with FHA loans? Will it push borrowers to get private flood insurance in risk-prone areas? Email me at mvolkova@housingwire.com
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