Below is a great article that was found in the Chicago Tribune (3/8/15) by Lew Sichelman (United Feature Syndicate).
Starting January 2016, lenders will be required to collect escrow funds from borrowers who have flood insurance, just like they do for property taxes and hazard insurance.
Though the proposed rules won’t take effect until almost a year from now, it won’t hurt borrowers to start getting familiar with them so they won’t be shocked when their house payments go up Jan, 1.
Under the rule, which is subject to a few changes, regulated lending institutions must escrow premiums and fees for flood coverage on loans secured by residential properties starting next year. Besides new mortgages made after that date, the rule also would apply to older loans that are increased, extended or renewed.
Also, come the first of the year, borrowers already on the books must be given the options of escrowing their flood insurance premiums if they so desire.
In a key change from previous proposals, the rule would eliminate the requirement that would have forced borrowers to obtain coverage for a structure that is a part of a residential property in a special flood hazard area if that structure is detached from the house and does not also serve as a residence. But lenders can require insurance on the detached structures if they determine that it is necessary to protect the collateral securing the mortgage.
After several false starts, the latest federal edict on escrowing for flood coverage was issued late last year by five regulatory agencies: the Federal Reserve Board, Farm Credit Administration, Federal Deposit Insurance Corp., National Credit Union Administration and the Comptroller of the Currency.
The rules implement changes required by last year’s Homeowner Flood Insurance Act, which itself amended the Biggert-Waters Act of 2012.
