National Flood Insurance Program Saved in the Eleventh Hour


National Flood Insurance Program Saved in the Eleventh Hour

By: Adam Matheny

Leave it to the federal government to wait until the last minute to save this vital program. Thanks to the passing of several congressional bills, the NFIP (National Flood Insurance Program) is safe, at least until the 30th of November. The bills were passed on the day the NFIP program was due to expire.

Impact On The Banking Industry

Many different financial trade organizations such as the Mortgage Bankers Association are glad to see the extension pass but want the federal government to go one step further and come up with a long-term reauthorization that will provide protection for both residential and commercial properties. Not only will passing a long-term policy help protect property owners, but it will also add a layer of protection to companies that sell and or administer these policies to millions of American home and business owners

More importantly, these organizations want to see the market for private flood insurance expanded and exemptions put in place for multifamily and commercial properties to protect them from being required to purchase coverage from the NFIP. However, while the Independent Community of Bankers of America (ICBA) would like to see an increase in private-market insurer participation, it does not want to see the mandatory participation regulations removed.

Private market insurance would help to keep rates affordable but removing the mandatory purchase clause might put local banks at a huge disadvantage in comparison to regional and national lenders.

The Bill Passed in the House and the Senate

In the House, the bill passed with a vote of 366 to 52 in favor, which according to American Bankers Association President & CEO Rob Nichols will help provide significant stability for both lenders and borrowers during the coming hurricane season. Any lapse in this program could result in costly closing delays for the buyer, the seller, and the lender. According to Rob, the ABA is interested in finding a long-term solution that would make the NFIP a more sustainable entity while at the same time keeping it more affordable and available to all.

The Senate voted 86 to 12 to pass this measure. At the same time the Credit Union National Association (CUNA) stated that while they do support the measure, there is some concern about the increase in civil penalties. The concern is that if this happens, the burden on small lenders would make it harder for credit union members in areas where this type of insurance was mandatory to secure a mortgage. Numerous trade associations are concerned that any further lapse in coverage could be disastrous, after the many financial issues that occurred after two lapses in the program during the course of 2017.

Must Continue to Cover In 2018

“A lapse of the NFIP, especially during the height of hurricane season, will leave millions of Americans at risk and result in severe disruption in the over 20,000 communities across the United States that depend on the NFIP. Furthermore, a lapse in the NFIP may slow down recovery efforts in Texas, Louisiana, Florida, Puerto Rico and other states impacted by the devastating 2017 hurricane season by making it harder for disaster assistance recipients to satisfy flood insurance requirements,” according to a draft letter sent to House leaders.

While the NFIP is currently $20 billion in debt to the treasury, the current legislation does need to be updated. In a statement by Sen. John Kennedy (R-La.), he said, “We need to reform this program, but we also need to keep it alive through the end of hurricane season. People have been living near the water since Moby Dick was a minnow. … A reauthorization gives us time to make meaningful changes without scaring 5 million Americans half to death.” The bill was finally passed within hours of when it was scheduled to expire and sent to the White House for the President’s signature.

Private Flood Insurance Markets

Flow Insurance Services knows private flood, and we know it well. While the fate of the NFIP is still up in the air, extensions will likely continue to happen until a permanent solution is in place. Private flood insurance markets continue to expand, offering more coverage than the current NFIP and are often time must more competitively priced. Place your trust in us and let us help you to write more business. When it comes to growing your business, things can be challenging. Embrace the opportunity of private flood insurance!

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