What law mandates that borrowers escrowing for taxes and insurance must also escrow for flood insurance?

The National Flood Insurance Program (NFIP) mandates that if a borrower is required to escrows for real estate taxes and homeowners insurance, they must also escrow for flood insurance when the property is located in a Special Flood Hazard Area (SFHA). The purpose of this requirement is to ensure that borrowers maintain proper coverage and mitigates the risk associated with flooding, thereby protecting both the borrower and the lender.

This program plays a critical role in protecting property owners from the financial devastation that can accompany flooding by making flood insurance accessible and required in certain areas. In contrast, the other laws mentioned do not have this specific requirement regarding escrowing flood insurance along with taxes and homeowners insurance. Understanding this distinction is crucial for mortgage loan officers as it directly impacts how they manage escrow accounts for borrowers, particularly in flood-prone regions.