Partnership Aims to Automate MPPP Option.

The Flood Insurance Agency here has entered into an exclusive underwriting agreement with American Bankers Insurance Co. of Florida to introduce a new lender-placed flood insurance program, known as MPPPFlood.com.

And Evan Hecht, the CEO of TFIA, says the new program will make the Federal Emergency Management Agency's lender-placed insurance option easier for mortgage servicers to use. FEMA administers the National Flood Insurance Program.

Mr. Hecht told MSN that while federal law requires lenders to purchase insurance on behalf of homeowners who fail to buy government-backed flood insurance on their own, the NFIP's own lender-placed insurance option has lost business to private lender-placed flood insurance options. The NFIP's lender-purchased program, known as the Mortgage Portfolio Protection Program, does not require all the underwriting details that are usually required, because lenders sometimes do not have access to information such as the age of the property and the foundation type.

But when lenders opt for private lender-placed programs, it means that the NFIP's portfolio shrinks. That has vexed the NFIP, because risk is then spread out over a smaller portfolio, diminishing the program's actuarial soundness.

But many lenders found the NFIP's 25 pages of rules and regulations for participating in the MPPP too complex, and so they turned to private-sector options. Mr. Hecht hopes his solution, which automates and streamlines participation in the NFIP's lender-placed coverage, will change all that.

In addition, the private lender-placed insurance programs do not have the backing of the federal government in the event a "storm of the century" generates huge losses, Mr. Hecht noted.

"A lender that is using those other programs is hoping those other programs have enough money to pay the claims," he said.