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Flood Insurance Set to Expire Sept. 30

If Congress passes an extension, transactions can proceed. If not, homebuyers who need mortgage-mandated flood coverage should plan ahead to avoid problems.

WASHINGTON – National Flood Insurance Program (NFIP) authorization expires on Sept. 30, 2023. If that happens, it can disrupt Florida sales transactions if the buyer’s lender requires flood insurance to secure their mortgage.

To avoid an NFIP shutdown, Congress must authorize an extension. However, it’s not clear if that will happen this time if a divided Congress ties the issue to other financial bills. In the past, lawmakers have often passed a short-time extension in order to work out details. At times, however, flood insurance has expired for days or weeks.

An expiration doesn’t generally affect current homeowners with flood insurance unless they need to renew coverage during the shutdown. But it can upend transactions heading to closing if the buyer needs flood insurance and can no longer get it from the federal government.

If a buyer needs flood insurance and plans to close after Sept. 30, they should focus on getting it secured before that date – and renewing homeowners or those who want new coverage should do the same.

What if NFIP shuts down and a buyer needs coverage?

The loss of federal flood insurance doesn’t necessarily shut down a transaction, but it does add extra hurdles. Buyers who cannot secure NFIP coverage before Sept. 30 can also turn to private flood insurers in most areas of Florida. However, private coverage isn’t necessarily cheaper, and it doesn’t always insure the same issues. In addition, buyers considering private coverage must confirm that their lender accepts it in lieu of NFIP policies.

In some cases, sellers can move their flood insurance policy to the buyers, but this option is limited.

What is the National Association of Realtors® (NAR) doing?

NAR and four other housing groups – CCIM Institute, Institute of Real Estate Management, Mortgage Bankers Association and the National Association of Home Builders – wrote a letter to members of the U.S. House and Senate urging them to extend the NFIP program, including:

  • Rep. Kevin McCarthy
  • Rep. Hakeem Jeffries
  • Sen. Charles “Chuck” Schumer
  • Sen. Mitch McConnell

The group wrote that “Americans deserve certainty and stability in the flood insurance marketplace so that they can protect their homes, businesses and loved ones.” The housing groups urge an immediate extension of NFIP.

“Extending the NFIP would ensure this vital program does not lapse in the middle of hurricane season or create additional challenges for residential and commercial property owners, buyers, managers, renters and tenants,” they said. “We commend the House Financial Services and Senate Banking Committees for continuing to work on longer-term NFIP reauthorization and reform measures and look forward to Congress bringing some stability and predictability to this essential program.”

NAR also created a downloadable PDF in December 2022 that includes recommendations for homebuyers facing a loss of necessary flood insurance coverage.

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