MBA Commercial / Multifamily Flood Insurance

The Mortgage Bankers Association (MBA) strongly supported the reauthorization of the NFIP that continues coverage for commercial and single-family residential properties, as well as expanding coverage for multifamily properties in special flood hazard areas. MBA recommends that the implementing agencies work to reduce the compliance burden placed on lenders and other parties. MBA also encourages clarification of the circumstances under which a lender must accept a private flood insurance policy in order to ensure continued robust participation in the NFIP.


The National Flood Insurance Program (NFIP) provides federally subsidized flood insurance to property owners located in special flood hazard areas, whose communities agree to adopt and enforce floodplain management measures and to make improvements to minimize future flood damage. Currently, more than 20,000 communities participate in the NFIP.

The Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) reauthorized the NFIP for five years and took steps to ensure the program's ongoing financial soundness. Chief among these was the phasing out of subsidized flood insurance rates through a number of avenues. In addition, Biggert-Waters Act regulations proposed in October of 2013 would:

1) Require regulated lending institutions to escrow premiums and fees for flood insurance for single-family residential properties;

2) Require direct lending institutions to accept certain private flood insurance and to notify borrowers of the availability of such insurance; and,

3) Amend existing lender-placed (force-placed) insurance requirements.

Certain provisions of the Biggert-Waters Act, particularly the phasing out of the flood insurance subsidies, were modified in 2014 with the passage of the Homeowner Flood Insurance Affordability Act.   Clarification of private flood insurance policies, however, was not addressed.


MBA supports efforts by Congress and the Administration to ensure the continued strength of the NFIP through reform, and supports the acceptance of private insurance policies to meet the NFIP's mandatory purchase requirements. In order to accelerate entry of the private sector into the flood insurance market, MBA urges clarification of the circumstances under which a lender must accept a private insurance policy, particularly to ensure that determinations of 'equivalency' between an NFIP policy and a private policy are clear and do not impose additional risk to lenders and other parties.

MBA is also concerned that the proposed regulations will pose a significant compliance burden on lenders without a corresponding benefit to the public or the NFIP itself. MBA recommends greater clarity with respect to the responsibility of lenders and other parties is essential. Lenders should not be required to become involved with complex insurance and flood mapping determinations, or to assume risks that they cannot effectively mitigate.

January 2015

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