Joint Letter to HUD on Acceptance of Private Flood Insurance for FHA-Insured Mortgages

Regulations Division
Office of General Counsel
Department of Housing and Urban Development
451 7th Street SW, Room 10276
Washington, DC 20410–0500

Dear Ladies and Gentlemen:

The undersigned organizations respectfully submit these comments in response to the above captioned notice of proposed rulemaking. We strongly support this action to enable FHA borrowers to satisfy the mandatory flood insurance purchase requirements under the National Flood Insurance Act, where applicable, by purchasing private flood insurance.

I. Executive Summary

We strongly support HUD's proposal to allow FHA borrowers to purchase private flood insurance in a manner consistent with federal statutes and in alignment with industry standards and federal agency regulations. As HUD notes, this will provide substantial benefit to FHA borrowers. To enable FHA borrowers to realize that intended benefit, we urge HUD to move forward with a final regulation as soon as possible.

In addition, to allow FHA borrowers to realize fully the benefits afforded by the private flood insurance market, we recommend aligning FHA with other federal agency regulations that govern the acceptance of private flood insurance. These recommendations include: (1) adopting identical compliance aid language; (2) adopting the federal regulators' discretionary acceptance and mutual aid society provisions; and (3) aligning the definitions of "private flood insurance."

Alignment of the two sets of regulations will enable FHA borrowers and lenders to leverage immediately the body of policies, documentation, and business operations that the lenders, private flood insurance companies, service providers, and others have already adopted under the federal regulators’ private flood insurance acceptance rules. That alignment also will reduce the risk that lenders could misapply the FHA regulation.

We also express our support for HUD's decision to permit, but not require, lenders to accept private flood insurance policies under its proposed regulations.

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