How National Flood Insurance Program deadline may affect home buyers

Consumers in the market for a home have been patiently waiting for the Federal Reserve to cut interest rates — a move it seems poised to make in September.

But without action from Congress, there could be another change at the end of that month that makes it temporarily trickier to buy or sell a home in some areas, or to refinance an existing mortgage.

That’s because the National Flood Insurance Program — the government-sponsored public insurance program that is the largest flood insurer in the U.S. — needs to be reauthorized by Sept. 30 to continue to issue new policies or increase coverage on existing policies.

Homeowners insurance policies typically don’t cover flood damage, meaning consumers who want to protect their home and its contents from that peril need a stand-alone flood policy. Mortgage lenders may require applicants to obtain such a policy before closing on a home, depending on the flood risk for the property.

“This is about the ability to get a mortgage in a flood zone after Sept. 30,” said Jaret Seiberg, a managing director and financial policy analyst at TD Cowen. “Without an [NFIP] extension, you’re not going to be able to get a mortgage in any area that requires flood insurance.”

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Congress established the NFIP in 1968 to provide reasonably priced flood insurance coverage. The Biggert-Waters Flood Insurance Reform Act of 2012, which included the NFIP authorization, expired on Sept. 30, 2017. Since then, Congress has extended the NFIP’s authorization 30 times — but it has also lapsed briefly three times in that period.

“This has been an issue now for many years where the program faces expiration and Congress, [at the] last minute, reauthorizes it,” said Bryan Greene, vice president of policy advocacy at the National Association of Realtors. “We’re trying to prevent natural disasters, but we seem to always face this potential man-made disaster of not acting timely enough.”