Five regulatory agencies, including the Federal Reserve and the Federal Deposit Insurance Corporation, crafted the 166-page proposal released Friday, which would require lenders to accept private flood insurance.
Standard homeowners insurance policies traditionally do not cover flooding, but the government-run NFIP has offered subsidized coverage since 1968.
Critics say the subsidized insurance has only increased incentives to develop places prone to flooding.
The draft regulations laid out Friday represent only a portion of the changes required by Biggert-Waters. Beyond the provision requiring banks to accept qualified private flood insurance, the agencies would force lenders to place flood insurance payments for certain residential properties and mobile homes into escrow.
The draft rule also would allow for “force placed” insurance, clarifying that, “a lender or its servicer has the authority to charge a borrower for the cost of flood insurance coverage commencing on the date on which the borrower’s coverage lapsed or became insufficient. “
The public will have until December 10 to comment on the proposed rule.