Flood insurance authorization lapses in government shutdown

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The government shutdown and Congress' inability to reauthorize the National Flood Insurance Program could delay some home sales and loan closings.

"An extension of the National Flood Insurance Program was attached to the continuing resolution that Congress failed to pass. That means that for the duration of the shutdown, the NFIP will not be able to issue new or renew flood insurance policies," said Sara Wiskerchen, a spokesperson at the National Association of Realtors, in an email.

"However, existing policies will not be affected until 30 days after their expiration date," Wiskerchen said. "Homebuyers will also be able to assume existing policies and claims will continue to be processed and paid as usual."

The Federal Emergency Management Agency confirmed in guidance posted on its website that the agency and Congress "have never failed to honor the flood insurance contracts in place," but that FEMA will not sell or renew policies for properties without reauthorization, which expired Jan. 19.

The lapse in funding could impact approximately 40,000 home-sale closings per month, according to NAR estimates.

But private carriers also offer flood insurance, so some coverage still will be available.

"Private flood insurance…provides a viable and necessary alternative in light of government shutdowns and Congress' failure to find a long-term solution to the troubled NFIP," said Jim Albert, president and CEO of Neptune Flood Insurance, in a press release Monday. Neptune provides coverage in Florida, Texas and Virginia.

Congress has been trying without success to reauthorize the NFIP since last year.

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