Watch Out – Lapse Of Flood Insurance May Delay Your Closing

National Flood Insurance Program Lapses

Congress has let the National Flood Insurance Program lapse for the third time this year.  The program expiration occurred on June 1st, the first day of  “hurricane season” for the Gulf of Mexico.  Congress has attempted to grant a short-term extension of the National Flood Insurance Program, but efforts have been delayed, as the extension is attached to other legislation in the House and Senate.  All the recent National Flood Insurance Program extensions have been short-term, as Congress hopes to overhaul the program, which will take some time.

Home buyers that are getting a mortgage to purchase their home are required by lenders to have flood insurance if their property is located in a Federal Flood Zone. Homeowners that already have flood insurance won’t be impacted by the lapse.  Nor will buyers of condominiums where the Condo Association has a master flood policy.   However, homeowners seeking to amend their current policy or purchase a new one will have to wait until Congress extends the program.  More urgently, those home buyers purchasing a home located in a Federal Flood Zone and obtaining a mortgage won’t be able to close on their sale until Congress grants another short-term extension.

The NAR has been contacting members and asking them to contact their Congressional Representatives to extend the National Flood Insurance Program sooner than later.  It is feared that if Congress doesn’t act by the end of the month, their could be significant repercussions on other areas of the housing recovery.  A word to the wise, as soon as you have an executed sales contract, check to see if the property is located in a Federal Flood Zone. Hopefully the problem will be resolved soon, but until then it’s important to stay on top of this important issue.