If Congress allows a shutdown that lapses National Flood Insurance Program (NFIP) authorization, the program would stop issuing new policies and would not process renewals or endorsements until reauthorization, while existing policies remain valid until their scheduled expiration.
What Stops and What Continues
- Stopped: New NFIP policies, policy renewals, endorsements, and increases in coverage would be suspended during the lapse.
- Continues: Claims on active NFIP policies can still be paid from existing fund balances, though payment capacity could be strained after a major disaster if borrowing authority is restricted.
Borrowing Authority and Disaster Risk
NFIP’s emergency borrowing authority from the Treasury would be drastically reduced during a lapse, cutting the program’s post-disaster cash cushion and raising the risk of payment delays or funding shortfalls after a large storm.
Effect on Real Estate and Mortgage Closings
Homes that require federally-backed flood insurance for mortgage closings would face delays or cancellations because lenders typically require proof of NFIP coverage and new policies cannot be issued during a lapse. Industry estimates show thousands of transactions per day could be affected if the program is not reauthorized.
Geographic and Market Impacts
Flood-prone states and areas with limited private-market flood insurance options would be hit hardest, with coastal states like Florida facing disproportionate disruption to sales, affordability, and local markets.
What Policyholders and Buyers Should Do Now
- Buyers closing soon: Try to secure or renew NFIP coverage before the lapse date.
- Policyholders: Check policy expiration dates and pay premiums timely to avoid unintended lapses.
- Sellers and lenders: Prepare contingencies for closings that depend on NFIP certificates and explore private-market options where available.
Timeline and Next Steps
Congress often passes short-term extensions, but the situation can change quickly; watch for reauthorization bills or continuing resolutions and official FEMA updates for the definitive status of NFIP operations.
Whatever happens, our team is ready to help guide you through. Call or text the flood insurance experts at Deeley today: 410-213-5600.
