Are lenders required to escrow flood insurance payments?

Yes. If a lender, its servicer, or a Federal Agency lender requires the escrow of taxes, insurance premiums, fees, or any other charges for a loan secured by improved residential real estate or mobile homes, it shall also require the escrow of all premiums and fees for any flood insurance. This requirement applies to loans made, increased, extended, or renewed on or after October 1, 1996.

Requiring lenders to escrow for flood insurance premiums improves compliance with flood insurance requirements by ensuring that homeowners located in Special Flood Hazard Areas obtain and maintain flood insurance for the life of the loan.