ASFPM submitted comments on HUD’s proposed rule to implement acceptance of private flood insurance as an alternative to NFIP insurance for FHA-insured mortgages.
In the comments, ASFPM applauded HUD/FHA in rejecting the concept of “discretionary acceptance” that was published in the final joint rule put in place by banking regulators in July 2019 and to voiced support for HUD’s proposed definition of private flood insurance.
The comments read, in part: “The practical reasons for rejecting the concept of ‘discretionary acceptance’ is that without the Congressionally prescribed sideboards, important consumer and taxpayer protections are lost. For example, discretionary acceptance could lead to excessive deductibles, which while leading to lower insurance premiums, could result in far too high out-of-pocket costs for the mortgagor to then ultimately recover when an event occurs. This, in turn, would lead the insured to then rely on taxpayer-funded disaster assistance instead of making a claim and ultimately sticking taxpayers with added disaster losses. And in some instances, that may still not be enough to recover and the borrower walks away from the home, leaving it in the hands of the mortgagee.”