Congress begins its fall session on Tuesday and lawmakers will have only a few weeks to act before the authority of the Federal Emergency Management Agency to issue new flood insurance policies expires on Sept. 30.
With the recent flooding caused by Hurricane Irene, the housing industry is apprehensive about a possible shutdown of the flood insurance program, which happened several times in 2010 as Congress fought over budget issues.
"This is the worst time to have a shutdown. It would give buyers another reason not to buy and lenders another reason not to lend," said National Association of Realtors senior policy analyst Austin Perez.
Perez noted that lenders will stop approving mortgages earlier than Sept. 30 if they feel flood coverage will not be available by the time a loan closes.
Senate Banking Committee chairman Tim Johnson, D-S.D., tried to get the Senate to approve a short-term extension of the NFIP before the August recess, but several Republican senators objected to the unanimous consent request.
The Senate likely will have an option to go with a three-month extension when it meets next week.
Chairman Johnson also is expected to schedule a committee markup of a NFIP reform bill that would extend the program for five years. "We will take it up as soon as possible," a committee spokesman said.
In July, the House of Representatives passed five-year NFIP reform bill by a vote of 406-22.
NAR supports a long-term reform of the flood insurance program, but the trade groups hopes the Senate and House will pass a short-extension extension to minimize any disruption to the real estate market. "We are urging them to do an extension as quickly as they can," said Perez.
He noted that a short-term extension will give the Senate time to work on a long-term comprehensive reform bill in an orderly way. Realtors have been meeting with their senators and congressmen during the August recess to convey that message.
