WASHINGTON - U.S. financial regulators proposed requiring lenders to accept private flood insurance on Friday as part of rules needed to implement a 2012 law that revamps a federal flood insurance program.
The Biggert-Waters Flood Insurance Reform Act called for changes to a government-run program that allowed many homeowners to buy subsidized flood insurance, after lawmakers decided the program's costs had become unsustainable.
Five agencies, including the U.S. Federal Reserve and the Farm Credit Administration, issued proposals to implement portions of the law.
They called for lenders to put in escrow all flood insurance payments and fees for loans secured by residential real estate and said lenders could charge for force-placed insurance if borrowers let their own flood insurance lapse.
Flood insurance has been a thorny problem for U.S. officials. Private insurance companies often do not offer it, so the federal program, run by the Federal Emergency Management Agency, allowed homeowners to buy government-backed insurance if their communities adopted floodplain management ordinances and set minimum construction standards.
The 2012 law, which was passed before "superstorm" Sandy devastated much of the U.S. east coast, attempted to cut the program's costs by making changes to flood insurance, flood hazard mapping and the floodplain management.
Some lawmakers since have said the changes could unfairly cause flood insurance premiums to spike.
The financial regulators said their proposals apply only to the portions of the law that fall under their jurisdiction. The proposal will be available for public comment until December 10.
