The House and Senate on September 25, 2024 passed legislation that would extend key parts of the National Flood Insurance Program (NFIP) until December 20, 2024. The extension is included in H.R. 9747, which also would provide funds for much of the federal government to keep operating until that date.
President Biden has said he will sign the legislation. Absent the enactment of this legislation, funding for the NFIP and many federal programs would expire on September 30, 2024—the end of the federal government’s current fiscal year. The December 20 date allows Congress to delay enacting longer-term legislation to extend the NFIP and government funding until after the 2024 election.
Congress has been unable to enact a long-term extension of parts of the NFIP. As has often been in the case in recent years, Congress has included an extension of the authorization of the NFIP in short-term and end-of-year appropriations measures.
Many members of Congress have introduced legislation providing for a long-term extension of the NFIP, and hearings have been held on the topic, but Congress has not acted on any of the long-term bills. Since the end of fiscal year 2017, 31 short-term NFIP reauthorizations have been enacted, according to the Congressional Research Service (CRS).
If the authorization for parts of the NFIP had been allowed to expire, (1) flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year, (2) new policies could not be issued, and (3) the authority for the NFIP to borrow funds from the U.S. Treasury would be reduced from $30.425 billion to $1 billion. According to the CRS, any expiration of the NFIP to issue new contracts would have serious consequences for the real estate market.
With past NFIP lapses, borrowers were not able to purchase flood insurance to close, renew or increase loans secured by property that required flood insurance. The CRS estimated that during a lapse in June 2010, each day more than 1,400 home sale closings were canceled or delayed. That represents more than 40,000 sales each month.
A potential alternative for home buyers and homeowners if the NFIP were allowed to expire would be to utilize private insurers to obtain flood insurance. As previously reported, rules of the Farm Credit Administration, FDIC, Federal Reserve Board, National Credit Union Administration, and Comptroller of the Currency authorize their regulated entities to use private flood insurance, and rules of the Department of Housing and Urban Development authorize the use of private flood insurance with mortgage loans insured by the Federal Housing Administration. Fannie Mae and Freddie Mac also permit the use of private flood insurance that meets their requirements. Although the private insurance market is growing, most property located in a special flood hazard area is insured through the NFIP.
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