FEMA Curtails New Flood Insurance Policies During Government Shutdown

In an unanticipated move Wednesday, the Federal Emergency Management Agency announced that it will halt regular National Flood Insurance Program operations during the government shutdown, a decision that will complicate and potentially delay loan closings for borrowers seeking mortgages where NFIP coverage is required. According to reports yesterday, FEMA said it would need to make determinations about the status of NFIP insurance policies that have been sold since the government shut down on Saturday morning.

FEMA’s decision came despite Congress’ passage of a standalone bill prior to the shutdown extending the NFIP’s authorization through May 31. The bill was signed into law by the president late last Friday. In a statement today, the American Bankers Association urged FEMA to reconsider its decision, noting that it directly conflicts with the intent of both Congress and the president that the NFIP remain operational during a government shutdown.

“This decision comes even as Congress passed and the president signed legislation last week that was specifically intended to keep the program operating during the government shutdown,” said ABA President and CEO Rob Nichols. “FEMA’s failure to inform Congress and the public earlier that such action would be taken despite the passage of the extension is distressing. We hope that FEMA will reconsider this unfortunate action immediately.”

Several lawmakers today echoed ABA’s concerns about FEMA’s decision. The association is working directly with the banking agencies and FEMA to provide additional clarity to bankers.