Regulators have proposed new rules that would require banks to accept private flood insurance on homes in high-risk areas.
The new rules would amend the Biggert-Waters Flood Insurance Reform Act of 2012, which eliminated subsidies for residential flood insurance and permitted certain premiums that had been frozen for years to rise. The bill also placed limits on the cost of force-placed flood insurance bought by banks, among other reforms.
The new rules, jointly proposed Friday by the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., would require banks to accept qualified private insurance on loans backed by properties in areas at risk for flooding. They would also require banks to place in escrow flood insurance payments for certain residential properties and for mobile homes, would clarify the effective dates of force-placed flood insurance and would stipulate when banks need to terminate force-placed policies and refund the payments to a borrower.
The regulators also proposed to unify their flood-insurance rules for banks and thrifts on both the national and state level.
Banks can comment on the proposed rules for 60 days, the regulators said.
The Biggert-Waters Flood Insurance Act took effect Oct. 1. Bankers have warned that the law will cause loan defaults to rise in certain areas, and have sought to delay its effective date.
This story originally appeared on American Banker.
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