Final regulation triggers important changes for flood insurance

It’s been a long and winding road but regulators including the NCUA have finally promulgated a final regulation outlining the conditions under which lenders will be required to accept “private flood insurance.” Just how big of a deal is this? These regulations have been under discussion since 2013 shortly after Congress passed the Biggert-Waters Act which is subsequently amended.

The National Flood Insurance Program mandates that persons who purchase homes in flood zones, have flood insurance. Since its passage in 1968, this requirement has become increasingly controversial, particularly with free market conservatives who rightly argue that the program distorts the true cost of real estate in flood zones by subsidizing risky residential purchases at tax payer expense. Funding for the program has become a challenge.

Biggert-Waters was passed in one of the few spasms of bipartisanship we have seen in the last decade. It requires lenders to accept private insurance provided it is at least as broad as policies provided under the National Flood Insurance Program as well as meets other conditions. For the last several years regulators have struggled to explain what exactly that means.

 

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