National Flood Insurance Program Set to Lapse

UPDATE on Thursday, May 30, 2019 at 6 p.m.:
National Association of Realtors® President John Smaby today commended Congress for passing a two week extension for the National Flood Insurance Program.

“The National Association of Realtors® is pleased that Congress acted before the National Flood Insurance Program’s insurance writing authority could expire, and we urge both the House and Senate to secure responsible reauthorization before June 14.”

The National Flood Insurance Program will expire at midnight on Friday, May 31, 2019. The National Association of Realtors® is working to avoid a lapse, while Congress continues to negotiate over a long-term reauthorization and reform.

There could be a brief lapse over the weekend, which means the NFIP cannot sell or renew flood insurance policies. We wanted to make you aware of the situation, so you can prepare your clients about a possible delay in closings during this lapse.

Earlier this month, the House of Representatives voted to extend the NFIP through September 30, 2019. The Senate responded last week by attaching a four-month NFIP extension to a multi-billion-dollar disaster aid package that passed 85 to 8. The House is expected to vote on the bill today, however, it’s unclear whether there will be objections to the bill with the added disaster aid package.

The federal requirement to purchase flood insurance is suspended during a lapse, which means it is entirely up to lenders to decide whether to continue making loans is special flood hazard areas while flood insurance is not available from the NFIP. It is possible that some lenders will consider making special-flood-hazard-area loans while the federal purchase requirement is suspended, but that depends on what risk each individual bank is willing to accept.

Private flood insurance backed by a source other than NFIP (e.g., Lloyd’s of London) is not affected by a lapse. The Pennsylvania Department of Insurance website provides other insurance options.

NAR continues to monitor the situation and is prepared to activate grassroots efforts if it becomes necessary. NAR believes House members support an NFIP extension; however, some members object to approving the disaster aid package without a roll-call vote.

PAR and NAR will keep you updated as events progress.