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Lapse in National Flood Insurance Program Looms

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Government + Policy

Lapse in National Flood Insurance Program Looms

If the program is allowed to expire on Sept. 30, both the mortgage industry and housing will feel the repercussions

September 25, 2023
Flooding from Hurricane Irma in Florida
Image: Satoshi Kina / stock.adobe.com

While some experts and associations have been sounding the alarm about the potential lapse of the National Flood Insurance Program (NFIP) at the end of this month for some time now, the effects of the lapse are becoming clearer as the prospect of a government shutdown grows. Even though a currently debated continuing resolution (CR) would fund the federal government after Sept. 30 and would include an NFIP extension, political observers and some in Washington are preparing for government funding to lapse, Housing Wire reports.

If the NFIP isn't reauthorized by Congress before Sept. 30, the consequences for the mortgage industry could include ceding control of varous land-use policies and a halt to some mortgage lending.

According to a report prepared by the Congressional Research Service (CRS) earlier this month, there would be several immediate impacts following the program’s expiration.

“The authority to provide new flood insurance contracts will expire,” the CRS report said. “Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year.”

The borrowing authority of NFIP from the U.S. Treasury would also be reduced from $30.245 billion to $1 billion. Flood mitigation assistance grants would still be available, but “the expiration of the key authorities listed above would have potentially significant impacts on the remaining NFIP activities,” the CRS explained.

There would also be a chilling effect on the mortgage industry, according to experts and lawmakers.

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