Regulators released a joint proposed rule on Oct. 24th that would require lenders to escrow flood insurance payments and eliminate mandatory insurance requirements for structures that are detached from a primary residence. The rule would require lenders to escrow premiums and fees for flood insurance for loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed after Jan. 1, 2016, unless the lender or the loan qualifies for a statutory exception. The proposal would also require lenders to offer borrowers of outstanding residential loans the option to escrow flood insurance premiums and fees.
It would eliminate a requirement to purchase flood insurance for a structure that is part of a residential property located in a flood zone if the structure is detached from the primary residential structure, and doesn’t also serve as a residence. The Federal Reserve, Office of the Comptroller of the Currency, FDIC, National Credit Union Administration and Farm Credit Administration, issued the proposal. The comment period will be open for 60 days.