Shutdown Could Disrupt NFIP, Real Estate Deals
A government shutdown may pause NFIP renewals, FHA loans and other real estate activity. NAR called on Congress to prevent the disruption.
WASHINGTON – The potential partial government shutdown would impact the Federal Housing Administration (FHA), National Flood Insurance Program (NFIP), mortgages and other industries related to the real estate industry.
The National Association of Realtors® released FAQs about the impact of a lapse in the NFIP to the real estate industry. Specifically:
- The NFIP cannot sell new or renew flood insurance policies after 11:59 p.m. Eastern time on December 20, 2024.
- Existing NFIP policies will remain in effect until their expiration date, and claims will continue to be paid as long as FEMA has the funds on hand.
- Renewal policies are generally issued if the application and premium are received prior to a lapse. Other renewals and policies expiring after a lapse must wait for reauthorization.
- During a lapse, property buyers can assume existing/renewal policies. "Assignment of policies" allows insurers to substitute the buyer's name for the seller's without having to reissue the policy.
- Private flood insurance backed by a source other than NFIP (e.g., Lloyd's of London) are not affected. Visit the Pennsylvania Insurance Department page and the Florida Office of Insurance Regulation page for options. Please remind your clients to read the fine print of any insurance policy.
- The federal requirement to purchase flood insurance is suspended, which means it is up to lenders to decide whether to make loans in special flood hazard areas while NFIP insurance is not available.
In a December 18, 2024, letter to Congress, NAR president Kevin Sears urged lawmakers to take positive action on the NFIP.
“Americans deserve certainty and stability in the flood insurance marketplace so that they can protect their homes, businesses and loved ones,” Sears wrote. “Since 2017, NFIP’s authority has been extended 31 times and allowed to briefly lapse on several occasions. Another lapse of the NFIP will leave millions of Americans at risk and disrupt the purchase of flood insurance in more than 20,000 communities across the United States.
“Not only would Americans be unable to purchase new NFIP policies during an authorization lapse, but also property owners and renters currently insured by the NFIP would be unable to renew their policies,” he continued. “Without access to flood insurance, American families must rely on federal disaster aid, which is severely limited. According to NAR research, 1,300 property sales each day could be forced to move forward and go bare without the protection of flood insurance depending on lender approval.”
For more information from NAR, click here. For information from FEMA, click here (See Q&A beginning page 7).
NAR also released a memo in September about what a government shutdown means for Realtors® with information pertinent to a December shutdown. The information includes how it would affect federal housing programs.
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