Update on the National Flood Insurance Program

WASHINGTON – Jan. 23, 2018 – President Donald Trump signed a short-term spending bill Monday evening to reopen the federal government after a three-day shutdown. Earlier in the day, the House and Senate passed the bill to avert the complications of a longer shutdown, but lawmakers must pick up the debate again before Feb. 8 when the extension expires.

While the National Flood Insurance Program (NFIP) is not a direct part of federal funding, its future has been tied to it recently because the flood insurance extension has been voted on as an amendment to the larger spending package. As a result, another government shutdown in 15 days would affect flood insurance, as well as other government-backed programs such as FHA loans.

“We are pleased that members of Congress were able to come together to extend short-term funding for the federal government and end the shutdown, which, thankfully, will have only a minimal impact on real estate transactions,” says Elizabeth Mendenhall, president of NAR.

Real estate impact if Congress fails to act by Feb. 8

  • Some home sales, such as new construction in special flood hazard areas, could see a delay because NFIP won’t be able to issue new policies or renew existing policies during the shutdown. However, transactions involving homes with existing policies may not be affected because their policies will transfer over to the new owners. (See “Closings threatened as federal flood insurance expires“)

Existing policies that expire during the shutdown shouldn’t be affected unless the shutdown lasts more than 30 days – the policy’s renewal grace period. There will be no impact on homeowners filing flood insurance claims; they will get processed as usual.

Following this shutdown, we strongly urge Congress to speed passage of legislation to reauthorize and reform the National Flood Insurance Program for a longer term and end the uncertainty of the current stopgap approach,” Mendenhall says.

  • Home sale transactions involving FHA mortgage insurance should proceed without interruption. The agency can continue to endorse new insurance commitments but processing could take longer because of staff shortages. However, commercial investment projects using FHA multifamily insurance will face delays because the agency won’t make new insurance commitments for those projects during the shutdown.
  • All mortgage transactions, including those involving conventional mortgage financing, could face longer processing times because of staff shortages at the IRS, notably those who process mortgage lenders’ requests to verify applicants’ tax returns and Social Security Administration staff who verify social security numbers.
  • Depending on the real estate transaction, there could be other delays if it requires any type of federal approval or input. In many cases, the federal employee who would speed that process could be furloughed for the duration of the federal government shutdown.

Source: Realtor® Magazine