Bulletin 2023-002 FHA Private Flood Insurance

FHA Private Flood Insurance

Newrez LLC "Newrez" Approved Correspondent Clients: Newrez is aligning with FHA Mortgagee Letter 2022-18 Acceptance of Private Flood Insurance for FHA-Insured Mortgages.


FHA will allow borrowers the option to purchase private flood insurance (PFI) as an alternative to National Flood Insurance Program (NFIP) policies for FHA-insured mortgages secured by properties located in a FEMA designated Special Flood Hazard Area (SFHA).


The terms and coverage amount of the PFI policy must be at least equal to that provided under an NFIP policy.


Eligible properties include:


  • Property improvements (dwelling and related structures/equipment) that are part of the property value and subject to flood damage are located in an area
  • Designated by FEMA as an SFHA and flood insurance is available in the community


To be compliant with a Private Flood Insurance (PFI) the following is required: 


  • 100% replacement coverage or the insurance costs of improvement which consists of development or project costs less estimated land cost
  • Maximum amount of NFIP insurance available or
  • The outstanding principal balance of the mortgage


PFI policy must be issued by a licensed insurance company or insurance regulator and approved by the state or jurisdiction where the property is located.


Flood insurance policy must provide:


  • Coverage is at least and broad as the coverage under the NFIP including all exclusions and conditions offered by the insurer
  • Deductibles no higher than the specific maximum and includes similar non- applicable provisions as a standard policy under NFIP
  • Must provide requirement for 45 days written notice for cancellation or renewal of flood insurance to all parties. If REO is owned by HUD, notice to be provided to HUD
  • Notice for availability of Flood insurance coverage under the NFIP
  • Mortgage interest clause similar to standard Flood insurance policy under NFIP
  • Provide provision for borrower to file a claim within 1 year of written denial
  • Contains cancellation provisions that are a restriction in standard flood insurance policy under NFIP


PFI policies may provide the following attestation statement which reflects compliance:   This policy meets the definition of private flood insurance contained in 24 CFR 203.16a(e) for FHA-insured mortgages.


  • When the PFI Policy shows this statement, the insurance provider, is confirming the PFA policy meets the flood insurance requirements.
  • A mortgagee may not reject a policy solely because it is not accompanied by the PFI Compliance aid if all required documentation shown above is provided.