As a potential federal government shutdown casts uncertainty, a coalition of 12 organizations from the housing and insurance sectors is advocating for the urgent extension of the National Flood Insurance Program (NFIP), which is set to expire this Friday.
Failure to renew the program could disrupt about 1,300 property transactions each day, creating widespread challenges.
Impact on Homeowners and Property Transactions
These organizations stress that allowing the NFIP to lapse would not only endanger the safety of millions of Americans but also complicate the process of obtaining flood insurance in over 22,000 communities nationwide.
Many of these communities are still recovering from devastating weather events, including recent hurricanes, making the continued availability of flood insurance more critical than ever.
Prominent groups in this advocacy include the American Land Title Association, the Mortgage Bankers Association, and the National Association of Home Builders.
Since 2017, the NFIP has been extended 31 times, often with brief interruptions.
Established by Congress in 1968 through the National Flood Insurance Act, the program is managed by FEMA.
The NFIP and Legislative Efforts
The NFIP permits more than 50 private insurers to create their own flood insurance policies while receiving federal loans from the Department of the Treasury for specific claims.
It’s important to note that community participation in the program mandates adopting regulations designed to minimize flood damage.
The NFIP is facing expiration at a critical time coinciding with an imminent government shutdown, driven by a stalled bill that lacked adequate support, including from some Republicans.
Lawmakers have until midnight Friday to reach a consensus and avoid shutting down the government.
Potential Consequences of a Lapse
If the NFIP were to lapse, homeowners would not be able to purchase new flood insurance policies.
Existing policies would remain in force until their renewal dates, but a lapse might leave many homeowners relying solely on limited federal disaster assistance.
The coalition’s letter warns that new property buyers could experience significant financial losses or be forced to pay additional fees to keep their interest rates stable, with the National Association of Realtors estimating that approximately 1,300 property sales per day could be at risk.
Homeowners might also find themselves facing lender-placed insurance—often more costly than directly obtained policies—adding an extra financial burden on families.
This letter was sent to Speaker of the House Mike Johnson and Democratic Leader Hakeem Jeffries, with a similar document directed to Senate leaders Majority Leader Charles Schumer and Republican Leader Mitch McConnell.
In an effort to provide stability for this essential program, these organizations are calling on Congress to pass the NFIP Extension Act of 2024.
This proposed legislation seeks to extend the program’s authorization until September 30, 2025, and is currently under consideration in both chambers of Congress.
Since its inception, the NFIP has administered 2.6 million claims, including over 21,000 claims processed just in 2023, resulting in payouts that exceed $1 billion.
Currently, the program provides coverage for approximately 4.6 million properties across the nation.
Source: Housingwire