Flood Insurance Program set to lapse for the FOURTH time this year!
According to information just received from a Travelers Insurance Company bulletin today 05/27/2010:
It appears that Congress will be adjourning without passing a bill that will reauthorize the National Flood Insurance Program (NFIP) beyond May 31, 2010. This means that the program WILL EXPIRE at midnight on May 31, 2010.
The Senate is not due to vote on the bill to extend the NFIP until at least Monday, June 7, 2010. This means we will be faced with another lapse in statutory authority to issue or renew flood insurance policies pursuant to the NFIP. Based on past experience, this lapse means that we will be unable to issue any new or renewal flood policies, or make coverage changes on existing flood policies after May 31, 2010.
FEMA has advised us to pend premium transactions received after May 31, 2010, until, and if, Congress and President Obama pass and sign the bill that re-authorizes the NFIP. New and renewal policies or coverage changes will go into effect at the earliest date, which is consistent with the receipt of premium and waiting period rules of the NFIP and the expected extension of authority for the NFIP. For applications made in connection with a mortgage loan, if the extension of the authority to issue flood insurance policies under the NFIP is granted retroactively, new policies will be issued effective as of the date of the loan closing. Additionally, if Congressional extension is granted retroactively, any claim for insurable losses suffered from the effective date for the policy term will be honored by the NFIP, even if the authority is granted after the date of such losses.
In essence Congress has just made the business of closing a loan for homes in a Special Flood Hazard Area more difficult. You would think by now they would have done something to deter this from happening again! We will be up to date on all the idiosyncrasies of how to deal with the hiatus … give our office a call with any questions or concerns.