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A law intended to make the National Flood Insurance Program sustainable could force many owners out of their homes and hurt the housing recovery.
October 11
Regulators have proposed new rules that would require banks to accept private flood insurance on homes in high-risk areas.
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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