FHA 203K Renovation Loans Can Be Used to Mitigate Flood Risk
On June 24, the FHA responded to a request from the National Association of Realtors (NAR) and other groups, regarding the use of the FHA 203K Renovation Loan program for flood mitigation.
Back in February, NAR and the coalition asked FHA to confirm the eligibility of the FHA 203K program for the rehabilitation of homes that have not been damaged in a flood, but are at risk of damage from future flood events.
In the past, the renovation loan program has been used to rebuild homes affected by floods, and the question was if the 203K program could be used for flood mitigation prior to a disaster.
In their response, FHA confirms that, "the mitigation of flood risk to an existing home either through relocation or elevation of the existing structure is permitted by the 203K program." While the program has required the retention of the existing mortgage, following Superstorm Sandy, "FHA issued a waiver of the requirement that the existing foundation remain in place for eligibility under the 203k program through Mortgagee Letter 2013-36 for homes where the current foundation would not meet flood elevation requirement, local codes or FEMA requirements."
Using the 203K program may be a viable alternative for homeowners or prospective homebuyers to mitigate the flood risk on their home, and lower their flood insurance premiums.
Please contact us if you have any questions or comments.