The National Flood Insurance Program (NFIP) is set to expire this Friday, May 31st, and Congress has once again failed to reauthorize the program.
The Senate passed a two-week extension, retroactive to May 31, before adjourning last week for a one-week recess. Most House members, however, had already departed Washington for their home state.
Sen. John Kennedy (R-La.), sponsored a fresh attempt on Tuesday to bring up the extension, objected to by Rep. Thomas Massie (R-Ken.), making reauthorization unlikely until the House returns next week.
In a situation where Congress fails to reauthorize the program, loan closings can become delayed or complex, and can cause additional costs and added frustration to all involved.
A recent article published by the ABA, reviews how lenders can be prepared for a lapse:
Have a plan of action for securing flood insurance.
Loans on properties that require flood insurance can still close, but must still adhere to regulatory guidelines to ensure that policies will be secured upon reauthorization. Otherwise, obtaining private flood insurance can satisfy the loan requirement.
Get an official flood determination at the start of every transaction.
The best way to be prepared for any and all scenarios is to have the best information at hand. Having an official, accurate, structure-based flood determination at the very start of a transaction can help avoid frustration later on.
Not only are flood determinations still required during an NFIP lapse, official determinations are crucial to evaluating the level of risk – if any – involved in the deal.
A structure-based flood determination, and expert analysis from flood experts, can provide clarity and proper expectation for the life of the loan.
After reauthorization, check date coverage against your policies.
As the ABA states, “Once the Program has been reauthorized, remember to check whether the reauthorization is retroactive.” Policies will only be effective in relation to the authorization date.
“This means that any losses sustained during the actual time of lapse are not recoverable under the NFIP.”
For more information, contact our Flood Resource Center at any time via the message box below. To read the full article by ABA, click here.